Home Money Are mortgage rates about to rise? Budget sees rise in swap rates

Are mortgage rates about to rise? Budget sees rise in swap rates

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Are mortgage rates about to rise? Budget sees rise in swap rates
  • Mortgage prices are largely based on Sonia swap rates, which increased after the budget.

Mortgage costs could rise after Rachel Reeves’ budget led to a rise in swap rates, which influence the price of fixed-rate mortgages.

The price of fixed rate mortgages is largely based on Sonia swap rates, the interbank interest rate, based on expectations of future interest rates.

When Sonia swaps rise high enough, it often results in fixed mortgage rates rising, and vice versa when they fall.

Today, five-year swaps have risen to 4.04 per cent, up from 3.87 per cent on October 29, the day before the budget. They have increased from 3.7 percent the previous week.

Coming back up: If swap rates stay where they are, we will likely see mortgage rates rise.

The lowest five-year fixed-rate mortgage is currently 3.79 percent, and it’s rare for the lowest rates to be below equivalent swaps as they are now.

Only three major mortgage lenders have announced rate changes since the budget.

Virgin Money and Halifax have announced they will increase rates, while Santander has gone the other way and said it will reduce them.

If swap rates remain where they are currently, we are likely to see a rise in mortgage rates, according to Mark Harris, chief executive of mortgage broker SPF Private Clients.

“Swap rates increased thanks to the budget, but this could be a knee-jerk reaction rather than a sustained period of higher rates,” he said.

‘Only time will tell: if swaps remain at high levels for a while, lenders may have to revalue them further.

‘Lenders have been reviewing prices this week – some raising rates, others cutting prices to attract new business.

“Borrowers looking for a mortgage should plan ahead and speak to a broker across the market to find the best deal available to them.”

Nicholas Mendes, mortgage technical director at John Charcol, expects this to be a short-term problem. Expect mortgage rates to fall in the coming months.

Mendes predicts that the lowest mortgage rates could fall to around 3 percent next year.

“From a mortgage perspective, any immediate changes in interest rates following the budget are unlikely to alter the medium-term trend in base rate reductions, although they may influence the pace of cuts,” Mendes said.

‘I anticipate the downward trend in mortgage rates will resume before the end of the year, likely returning to the best rates we have seen recently, with further improvements next year.

‘However, it is essential for borrowers to remember that current fixed mortgage rates already take into account some expected cuts to base rates over the next year.

“Consequently, I expect lower fixed rates to stabilize around the low 3 percent range next year.”

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How to find a new mortgage

Borrowers who need a mortgage because their current fixed-rate agreement is ending or because they are buying a home should explore their options as soon as possible.

What happens if I need to remortgage?

Borrowers should compare rates, talk to a mortgage broker and be prepared to take action.

Homeowners can close a new deal six to nine months in advance, often with no obligation to accept it.

Most mortgage agreements allow fees to be added to the loan and are only charged when requested. This means borrowers can get a rate without paying expensive processing fees.

Please note that by doing this and not paying off the fee upon completion, interest will be paid on the fee amount for the entire term of the loan, so this may not be the best option for everyone.

What happens if I am buying a house?

Those with agreed-upon home purchases should also try to lock in rates as early as possible, so they know exactly what their monthly payments will be.

Buyers should avoid overreaching and be aware that home prices may fall as higher mortgage rates limit people’s borrowing capacity and purchasing power.

How to compare mortgage costs

The best way to compare mortgage costs and find the right deal for you is to speak to a broker.

This is Money has a long-standing partnership with free broker L&C, to provide you with free, expert mortgage advice.

Interested in seeing today’s best mortgage rates? Wear This is the best mortgage rate calculator from Money and L&C to show offers that match your home value, mortgage size, term, and fixed rate needs.

If you’re ready to find your next mortgage, why not use L&C’s Online Mortgage Finder? It will search thousands of offers from over 90 different lenders to discover the best deal for you.

> Find your best mortgage deal with This is Money and L&C

However, please note that rates can change quickly, so if you need a mortgage or want to compare rates, speak to L&C as soon as possible so they can help you find the right mortgage for you.

Mortgage service provided by London & Country Mortgages (L&C), which is authorized and regulated by the Financial Conduct Authority (registration number: 143002). The FCA does not regulate most buy-to-let mortgages. Your home or property can be repossessed if you don’t keep up with your mortgage payments.

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