End of the road for rock-bottom mortgage rates?
Over recent months borrowers have benefited from the lowest mortgage rates ever recorded. A fierce price war between lenders, and a low-interest-rate environment, have seen deals fall to record-breaking levels, but now experts are saying that the era of low rates is beginning to come to an end.
The Council of Mortgage Lenders (CML) has warned homeowners that rates can only go up, acknowledging that deals have already started to cost more.
'Little scope' for a further improvement in rates
Over recent months, low mortgage rates have helped first-time buyers get onto the property ladder and benefited thousands of homeowners. Now, the CML has urged borrowers to take advantage of the current deals before rates begin to creep up. It says that the housing market has “stalled” over the last few months and the cost of borrowing is already starting to sneak up. Part of the reason for this is because rates have fallen so low that banks and building societies simply have no room to cut rates any further.
It says: “Mortgage rates are still close to historic lows, but we see little scope for further improvement with recent data showing a slight increase in mortgage rates on offer. This might also temper appetite for remortgaging.”
First-time buyers could well be hit first, as the CML says that rate rises are “more evident” for those with smaller deposits. It said that rates for first-time buyers have been “edging up” since the closure of the government's Help to Buy mortgage guarantee scheme at the end of last year.
Experts have long been encouraging borrowers sitting on their lender's standard variable rate deals to switch to a better deal.
Charlotte Nelson from financial analysts Moneyfacts says: "Mortgage rates have shown signs of hitting rock-bottom levels. Lenders have no more margin to cut. So they can only go up. There is also talk of the base rate going up in the near future."
Bank official's comments make base rate rise in 2017 more likely
The CML's warning comes in the same week that an important Bank of England (BoE) official said that he is likely to vote to increase the base rate from 0.25% to 0.5% later this year.
Five members of the BoE's Monetary Policy Committee voted for rates to remain on hold earlier this month, with three backing a rise. Chief economist Andy Haldane says that he is likely to vote to raise rates in late 2017, making a rise in the cost of borrowing more likely.
It sets him on a collision course with the bank's governor, Mark Carney, who believes that now is not the time to raise rates. Mr Haldane would need to be joined by just one other official to gain the 5-3 majority needed to push rates up.