Don’t worry about in­ter­est rates, just keep calm and carry on

Mort­gage Mat­ters

Yorkshire Post - Property - - PROPERTY NEWS -

Franz Muehlthaler, mort­gage ad­viser, Hol­royd Miller Prop­er­ties

But with the Bank of Eng­land con­tin­u­ing to freeze the bank rate at 0.25 per cent, it poses the ques­tion: what does this mean for the year ahead? Will in­ter­est rates rise?

With con­cerns over a slow­ing econ­omy, the in­ter­est rate dropped in 2016 and saw lenders bat­tling to re­tain the all-time low sta­tus for fixed rate mort­gages. How­ever, there’s been a re­cent change in sen­ti­ment and econ­o­mists are now pre­dict­ing that an in­ter­est rate rise could well be on the cards for 2017, with cer­tain lenders show­ing signs of this al­ready.

Mort­gage rates are largely in­flu­enced by some­thing called ‘swap rates’. Fol­low­ing the Brexit vote back in June 2016, swap rates fell, which in turn saw lenders lower in­ter­est rates, par­tic­u­larly on fixed mort­gages. Since then, there’s been a steady in­crease in swap rates which could partly ex­plain the slow rise in in­ter­est rates we’re start­ing to now see. One lender has al­ready an­nounced they’ll be in­creas­ing the rates on all fixed rate prod­ucts by be­tween 0.1 per cent and 0.5 per cent.

This doesn’t come as quite so much of a shock when you look at re­cent Coun­cil of Mort­gage Lenders fig­ures that show how loan af­ford­abil­ity is at a his­toric low for those on the hous­ing lad­der and those look­ing to get on it.

But what does it mean for those look­ing for a mort­gage? Just like none of us could have pre­dicted Brexit or Don­ald Trump, we can’t pre­dict which way in­ter­est rates will go in 2017. We can, of course, look at the facts, but even if in­ter­est rates do rise, fix­ing your mort­gage now could still be the right op­tion for you, as re­gard­less of in­ter­est rates, a fixed rate can of­fer sta­bil­ity, which some peo­ple pre­fer to have.

In­for­ma­tion from the Hal­i­fax House Price In­dex data builds a pos­i­tive pic­ture of a calm mar­ket, show­ing signs of house price growth and sta­bil­i­sa­tion.

Brian Murphy, head of lend­ing for Mort­gage Ad­vice Bureau, com­ments: “The re­port re­leased from the Hal­i­fax refers to Septem­ber 2016 data, sug­gests a calm mar­ket; house price growth and sta­bil­i­sa­tion, with prices up +0.1 per cent on Au­gust, and up 5.8 per cent on the same quar­ter in 2015.

“Over­all the fig­ures were 0.1 per cent lower than the pre­vi­ous quar­ter, which again could sug­gest that, whilst the pace of growth is slow­ing, over the last six months prop­erty values have, broadly speak­ing, ticked along at the same rate.

“With the on-go­ing lack of sup­ply, cou­pled with com­pet­i­tive deals and eas­ing lend­ing cri­te­ria avail­able in the mar­ket, cou­pled with com­pet­i­tive deals and eas­ing lend­ing cri­te­ria avail­able in the mar­ket, it’s pos­si­ble that last quar­ter of 2016 will look pretty sim­i­lar to what we’ve seen dur­ing ear­lier months in 2016, as house price growth and values could pos­si­bly re­main steady for the fore­see­able fu­ture.

“It’s also in­ter­est­ing to note that the Hal­i­fax say in their re­port that the fig­ures re­leased are in line with their fore­cast for 2016, which should pro­vide re­as­sur­ance, for those who need it, in terms of the mar­ket as we move for­ward into 2017. All in all, for me the Hal­i­fax fig­ures would sug­gest it’s a case of ‘keep calm and carry on’.”

Franz Muehlthaler is a mort­gage ad­viser for Hol­royd Miller Prop­er­ties in as­so­ci­a­tion with Reach 4 Mort­gage So­lu­tions and Mort­gage Ad­vice Bureau.

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