Trump and Brexit set to signal the end of rock-bottom mortgage rates

The era of record-breaking mortgage rates could be set to come to an end as banks and building societies gradually begin to raise the rates on their best deals.

The economic implications of Brexit and the election of Donald Trump have begun to affect financial markets, and the likely outcome is a rise in mortgage rates. Lenders in the UK have begun to increase the cost of some of their mortgage deals as recent political events start to impact on financial markets.

Skipton Building Society has increased the rates on some of its mortgages by 0.37% while the West Bromwich Building Society has withdrawn its market-leading ten-year fixed rate at 2.59%.

The Daily Telegraph also reports that Virgin Money has increased the cost of several of its 95% mortgage deals by up to 10%. The paper says that “commentators say that it is a matter of when, not if, the cost of borrowing to buy a home increases”.

Election of Donald Trump partly responsible for rise in rates

Global financial markets have been volatile since the Brexit vote and the election of Donald Trump as US President. The cost of mortgages in America has already risen sharply - by 0.4% - and experts believe that British rates will follow.

The most important rate globally is the American government's cost of borrowing for 10 years. This has risen since the US election on fears that inflation will return. This rate then influences the British equivalent - our 10-year gilts - which, in turn, drive the cost of borrowing on the money markets. Fears of a 'hard Brexit' have also caused the cost of British government borrowing to increase.

All this has meant that 'swap rates' - the cost of fixed-rate borrowing by banks and building societies - have risen in recent weeks. Since their low point on 30 August, five-year swap rates have increased from 0.42% to 0.97%. Two-year swap rates have risen from 0.38% to 0.67% while three-year rates have increased from 0.38% to 0.77%.

Mortgage brokers believe that long-term fixed rates could be the first products to be affected, with predictions that the cost could easily rise by 0.25% before the end of 2016. The cost of shorter-term rates may remain similar as lenders bear increased borrowing costs in order to attract new business in the last few weeks of the year.