You are here: Home - Mortgages - First Time Buyer - News -

What will happen to mortgage rates in 2017? 

0
Written by: Andrew Montlake
10/01/2017
Mortgage rates reached record lows in 2016, but will the trend continue this year?
What will happen to mortgage rates in 2017? 

As we usher in a New Year, repeat the same old resolutions we did not quite hang on to last year, (or even get through January with still intact), we at least face the future with a degree of fresh optimism.

Let’s face it 2016 was pretty tough in parts, what with a Brexit Referendum, Donald Trump and famous names departing this world, but there was at least one certainty in the mortgage world – interest rates were low and going nowhere.

Whether you were happy with this fact of course depended on whether you happened to be a saver or a borrower, although part of the problem for first time buyers was that they happened to be both! Seeing those enticingly low interest rates seemed so much more affordable than paying expensive rent and trying to save for a deposit is hard at the best of times, but more of a kick in the teeth when there is miniscule interest to be earned.

To follow the US, or not?

The question on everyone’s lips now is whether 2017 will finally be the year they move upwards, much like our colleagues in the US as we usually follow their lead. It does seem however, that the US and the UK are this time on different paths and with tricky Brexit negotiations to come, however well the economy seems to be going now, it still looks like the Bank of England Base Rate will still be at its record low as we turn into 2018.

This does not mean however, that mortgage rates will continue at the level we have seen over the past year, in fact we have already seen lenders such as HSBC pulling their very low rates and the upward tweaking of products taking place across a broad stream of lenders.

The reason for this is that SWAP rates, the cost of funds over a fixed period of time that lenders base their fixed rates on, have been steadily increasing. In fact, although two year rates are slightly higher than they were in July, 5-year and 10-year rates have jumped by around 50%.

This is starting to be passed on by lenders and hence we may have finally seen and passed the low point of mortgage rates for the foreseeable future.

Increased competition

We have however, been here before and over the past few years there have been many pronouncements that rates are going to rise only for them to fall back once more. We also have a marked increase in competition from lenders who desperately want market share this year and a smattering of new lenders threatening to steal business from established rivals which will keep things competitive.

Then there is of course the unknown, and if last year taught us anything it was to expect the unexpected.

The good news is that even with a slight increase, mortgage rates are still very affordable for those who can cobble together a deposit, even those with only a 5% or 10% deposit are looking at historically low products.

What is more, lenders have started to open up criteria again to borrowers such as contractors, the self-employed and older borrowers, so never assume that you cannot obtain a mortgage, just make sure you get some professional advice.

Andrew Montlake is director at Coreco Group, a mortgage advisory firm

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

After an award-winning health insurance provider?

Winner of best online health care provider in the YourMoney.com Awards 2015

A guide to switching energy provider

All you need to know about switching from one energy supplier to another.

Guide to valuations and surveys

Do you need a vanilla valuation or a survey with a fringe on top? Martyn Stones explains the different types o...

A guide to picking the right credit card

To mark the 50th anniversary of Britain's first credit card, here's a handy guide to help you figure out which...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

Five fund tips for a 0.25% interest rate environment

With interest rates stuck at a record low 0.25% and expectations rates could fall to close to zero, here are ...

Protecting family wealth: 10 tips for cutting inheritance tax

Inheritance tax - sometimes known as 'death tax' - can cause even more heartache for bereaved families. But th...

Travel insurance: Five tips to ensure a successful claim

Ahead of your summer holiday, it’s important to make sure you have the right level of travel cover or you co...

Investing your money

Alliance Trust Plc gives you smart insight into how to invest your money

Money Tips of the Week

Read previous post:
A man hands over some keys
Buy-to-let mortgages culled in December

The number of buy-to-let mortgage products has dropped by the largest amount since 2009, according to Moneyfacts.

Close