‘Mortgage war’ keeps rates low – for now
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.”