Mortgage rates start to climb off record lows
MORTGAGE rates are creeping up, ending years of decline and raising affordability fears for young homeowners.
Rates on a two-year fixed-rate mortgage currently go as low as 1.05 per cent, according to MoneySuperMarket.
But the comparison website is urging people to remortgage as there are signs lenders are starting to raise rates.
First Direct offered 1.49 per cent at the start of July on its best price two-year fixed. This now sits at 1.69 per cent, MoneySuperMarket said.
It comes after comments from Bank of England rate-setters suggested some of them could soon vote to raise rates.
“Recent rate rise speculation is starting to make providers cautious, and this is being reflected in their offers,” said Dan Plant, consumer expert at MoneySuperMarket.
Some experts have voiced concern that newer mortgage holders could be complacent on the impact a rate hike will have on their finances.
“Rates haven’t gone up for the last eight years, and a lot of people in the current mortgage market have never faced a rate increase,” Rob Killeen, business manager at London mortgage brokers Capital Fortune, told Morning Wire.
“Customers are not fearful of rate increases because they have not experienced them.”
Killeen also notes that mortgage rates have been edging up over recent weeks. They could climb further if the Bank’s nine-strong monetary policy committee (MPC) has a bigger split than expected.
The MPC has voted unanimously to hold rates since December, but this is expected to end tomorrow when it announces its decision at midday.
“We retain the view that the Bank of England will most likely keep interest rates at 0.5 per cent with a 6-3 majority vote,” said economist Howard Archer from analysts IHS.
The move would fuel greater speculation of a rate increase coming before the end of the year. The Bank will also publish its inflation report, giving its latest forecasts on growth.
These could also impact expectations of when interest rates could begin to rise, and their future path.