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Is a mortgage rates rise imminent?

The likelihood of a mortgage interest rate rise is a really hot topic at the moment amongst lenders. In this article, Rob Starr of Crunch Mortgages has given us some insight into how likely a rise might be, and how prospective borrowers should react.


Will mortgage interest rates rise? I’d suggest that it’s now a matter of “When” rather than “If”.


The next decision by the Monetary Policy Committee (MPC) in May appeared to be a ‘rate rise done deal’ after the last meeting. However, it just shows how market sentiment (and the publication of conflicting data) can spread doubt when it comes to predicting ‘near certainties’.


Factors such as a bigger fall in inflation than anticipated, some particularly weak retail data, softer business surveys, and the rather cautious words of the Governor, Mark Carney, have all led to markets seriously hedging their bets when it comes to a May rate increase.


Currently the markets appear to be 50/50 on whether that rise is coming and it’s worth bearing in mind that this was 75/25 just a few days ago.


There’s no doubting that the ‘hawks’ on the Committee will continue to vote for a rise – however it’s a question of whether the other members feel strongly enough to act now, rather than perhaps hanging on a month or two to see how the data (and the UK economy) continues to react.


The average two-year fixed-rate mortgage across all loan-to-values is now priced at 2.5% – which is the highest level for almost two years. This perhaps provides a compelling reason for existing borrowers to act now and secure their rate before they rise even further.


We believe that this is perhaps a crucial time for those clients who wish to ‘get in’ before rates rise further, and after a decade in which rates have been historically low, the increase in mortgage costs will be a new experience for many who might have got into the mindset that 0.25/0.5% was ‘normal’.


Indeed, this marks again a further step along the road to a ‘new normal’ which, depending on who you believe, could be back to the 2-3% mark over the course of the next 18-24 months.


Looking to purchase a property?


We’re now saying to all existing mortgage clients and also those looking to purchase a property that they should check with us at Crunch Mortgages before you go ahead.


Not only can we access the most suitable deals for you, but as a Crunch client or Crunch Chorus member we’re here to make sure you get the best deal from across the whole market, and not just one single lender.

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