Could the Era of Cheap Mortgages Be About to End?.
That is the possibility being highlighted by many experts in the industry. Consumers have long enjoyed a period of low interest rates – great for those wanting cheap mortgages, but not so good for those who want better interest on their savings.
However, while we have heard rumours of rises in interest rates before, it is looking more likely we may see an imminent rise in interest rates. The Bank of England recently voted in favour of keeping the low base rate – currently set at 0.25% – the same. Eight members of the Monetary Policy Committee voted on whether to change interest rates, with three voting to set a rise in motion. This was higher than the expected outcome, which had indicated just one vote may be cast in this direction.
There is also evidence the chief economist for the Bank of England, Andy Haldane, might switch from voting to retain the low interest rate to voting in favour of it. Indications are this could happen in the second half of 2017, although of course, nothing is certain. However, with inflation reaching higher levels, the reason for the votes going in favour of a rise is easy to see.
“Get a good deal now”
“Anyone who is considering applying for a good mortgage deal should do so sooner rather than later,” said Darren Pescod, managing director of The Mortgage Broker Ltd. “Waiting too long might mean the current low deals could disappear altogether. It is unlikely rates will drop much lower, if at all, and waiting to see if they do could mean they end up going in the opposite direction.”
The Council of Mortgage Lenders has confirmed it sees “little scope” for further improvements on mortgage rates to be made, given the current situation. Indeed, their most recent data shows there have been subtle movements in the other direction. While it is possible to get superb deals on two-year mortgages, with 0.99% a real possibility, the chances of even cheaper deals are unlikely.
Darren Pescod agrees. “All signs are pointing to this being the absolute bottom of rock-bottom rates on mortgages,” he said. “I would expect to see some rises in rates in the very near future. It would be surprising if the base rate stayed the same throughout the remainder of 2017. Even if it manages to do that, 2018 could be a very different year indeed for mortgage holders.”
Clearly, locking into a good fixed-rate mortgage now would be the best course of action. There are good rates available on two-, three-, and five-year fixed rate deals, and those locking themselves in for five years may soon look back and be glad they did. While a sharp rise in interest rates is unlikely, the uncertainty of Brexit means we cannot know what the immediate future holds. Securing a good deal while you can would be a smart move. Even a base rate rise to 0.5% would be a major event after having super-low rates for so long.