Rates are now at record lows. This plummet is due to the battle of lenders for a hot spot in the best-buy tables. Records have revealed that ten-year fixed rates decreased to below 3pc for the first ever time in February of this year, and five-year fixes have fallen to below 2pc for the first time in April.
In order to secure these low rates, borrowers are now acting efficiently. The Bank of England revealed new figures this week that showed that mortgage approvals have experienced the greatest increase in 6 years, growing by 6,131 from March to April.
After the housing market saw a rather slow start to 2015, forecasts have been outlined by economists suggesting a booming recovery is on its way over the next few months.
What is it that effects a mortgage rate? Mortgage Broker St Neots
The independent pricing of fixed mortgage rates is massively dependent upon a number of factors. However the main factor is whether banks have access to cheap money that they can then lend out, usually available to them through money markets, allowing them to purchase money at a certain rate for a certain time period, also known as the “swap” rate. “Swap” rates such as this react directly to expectations of future interest rates and also inflation. Things such as this affect the price of mortgages.
How have fixed rates changed? Mortgage Broker St Neots
Due to the 2013 £80bn Funding for Lending Scheme provided by the Government, cheap money has been provided to banks and building society by the scheme and this mostly involves mortgage lending. The Government’s scheme has assisted to lower swap rates, combined with the ongoing pledge of several years to keep rates low from the Bank of England.
Although there were prior expectations that the first rate rise would occur during the summer of last year, it is now thought that rates will stay at 0.5pc until well into next year. The Funding for Lending Scheme took a redirection venture from mortgage lending to small business which may lead to a rise in the price of fixed rate mortgaging, although reactions may not take place until later on in this current year. However during that time, aggressive competition is apparent within a number of banks, who are competing for mortgage customers and doing so by massively decreasing their rates, leading to new record lows.
Broker of London and Country, David Hollingworth suggests that with the fall in funding costs and lenders competing for business, mortgage borrowers are in the best position possible: “Rates have plummeted to new lows eclipsing the previous best in mid-2013 and it’s not just those with huge deposits that are seeing the benefits,” he said. “Being able to fix at such low levels can offer significant savings now and also protect against rate rises in the future. Borrowers still need to look beyond some of the eye catching rates as the very lowest rates can come with hefty arrangement fees. However lenders are catering for all types of borrower and will usually have a range of rate and fee combinations to suit every homeowner.”
Your home may be repossessed if you do not keep up repayments on your mortgage.