Where Now For Mortgage Rates?
With turmoil on the stock market and HBOS being taken over by Lloyds TSB; with Libor rates rising, but the bank rate forecast to come down; with a proposed bail-out of sub-prime debts in the US: where will mortgage rate go next?
Mortgage rates are likely to take another hit after the turmoil in the money markets, the loss of Lehman Brothers in the US, and the proposed takeover of HBOS in the UK.
This comes after mortgage lenders had been cutting rates in the past four of five weeks as the Libor lending rate had come down. This week, however, Libor has shot back up again. However, despite that, banks have not yet been in a rush to pull existing mortgage deals.
If you are in a position where you need to remortgage, should you rush in now? With Libor the way it is, it seems likely that fixed rate mortgages will show some increases in the coming weeks. Nevertheless, central banks have pumped billions into the money markets to ease the pressure, and the prospect of a bail-out in the US for those still stricken by sub-prime debts saw stock markets rocket upwards on Friday morning. This could mean that banks will resist the urge to push up mortgage rates.
There are still forecasts for a Bank of England base rate cut in the autumn, and this should help variable mortgage rates.
Adopting a wait-and-see attitude could be beneficial, but it has risks attached in the current financial climate. Just when one hurdle seems to be cleared, another one – usually even higher – appears.
You can probably find a good fixed rate deal this week, but despite the savings to be gained by fixing now, if the base rate should fall then tracker mortgages will become more attractive. However, fixed rates may move up as soon as next week.
First Direct last week cut its two-year fixed-rate interest-only offset deals by almost one percentage point. The high fee option (£1,499 arrangement fee and £499 booking fee) was cut from 5.98% to 4.99%. The lower fee option (£299 arrangement fee and £299 booking fee) is down to 5.49 % from 6.39%.
The best lifetime tracker comes from HSBC at 0.79 % above base (making it currently 5.79%) with a £599 fee. The deal is remortgage only.
It is definitely a sensible time to seek independent professional mortgage advice.
