Money Matters: Why not now?

Our dedicated mortgage specialists take a deep dive into the current mortgage market to help you understand more about what’s going on.

You may have heard that fixed mortgage rates may actually come down over the coming weeks and months even though Bank of England base rates have now risen to 4%, and may continue to rise a little more. This has meant that some potential homebuyers are putting things on hold; waiting for cheaper fixed rates to materialise.

Although some 5 year fixed rate products have now just crept under 4%, this may reduce further by up to another 0.5% over the next couple of months as a price war develops between major high street lenders. However, it is unlikely that rates will return to the 1% or 2% levels that we have grown used to. This reduction in fixed rate products is further fuelled by the ‘Swap Interest Rate’ market (SWAPS).

The ‘Swap Interest Rate’ market

SWAPS try to predict the future when it comes to interest rates, and for some time they had been predicting that Bank of England would be increasing rates significantly over the coming year – potentially as high as 6 or 7%. Lenders had been creating fixed rate mortgage products based on these predictions, and that is why fixed rates have been so much higher than the actual Bank of England rate.

Since the ‘mini budget’ turmoil in September last year, the market has calmed, and the predictions for future interest rates, or SWAPS, have been coming down, which is the reason we’re seeing fixed rates being reduced despite Bank of England rates potentially continuing in an upward trajectory (just not nearly as high as was previously anticipated).

Will rising interest rates mean lower house prices?

It’s difficult to tell. The increase in house prices very much depends upon the supply and demand of property. With the supply of available property so low – and properties in short supply, the increased buyer demand ensures prices remain high. If, however, household finances are continually squeezed then experts do suggest that house prices will have slowed down by the end of the year.

So, is now a good time to buy?