‘Mort­gage war’ keeps rates low – for now

The Daily Telegraph - Your Money - - YOUR MONEY - Laura Suter

Com­pe­ti­tion be­tween mort­gage com­pa­nies is keep­ing rates low for bor­row­ers, but there are signs of rises com­ing.

This week HSBC launched a new low five-year rate of 1.79pc. This was swiftly beaten by Tesco Bank, which launched a 1.78pc rate.

Si­mon Collins of mort­gage bro­ker John Char­col said Tesco’s mort­gage was the low­est five-year rate he had seen.

The rates on 10-year fixed mort­gages have also fallen. TSB has low­ered its rate to 2.49pc. How­ever, 10-year rates have risen in the past few months, said Mr Collins.

There are fewer lenders in the 10-year mar­ket, mean­ing that rates are more volatile, he added.

How­ever, whole­sale “swap rates” – the cost of fixed-rate borrowing by lenders – are ris­ing. This sig­nals that higher mort­gage rates are on their way.

Swap rates plum­meted af­ter the Brexit vote in June last year and the Bank of Eng­land cut in­ter­est rates. This sent mort­gage rates to record lows, but they have been ris­ing since Au­gust.

Since their low­est point on Au­gust 10, af­ter Bank Rate was slashed, five-year swap rates have risen from 0.42pc to 1.05pc cur­rently.

Mort­gage rates are ex­pected to rise in re­sponse, al­though the level of com­pe­ti­tion be­tween lenders and some mar­ket stag­na­tion may be de­lay­ing re­ac­tions.

Mr Collins said: “What we have seen so far this year is a lot of tweak­ing on rates from lenders, so they stay in the best buy ta­bles. No one has gone out and made dra­matic changes.”

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