Mortgage rates have edged up in recent weeks amid speculation that the Bank of England may not reduce the base rate until August at the earliest.
Commentators previously anticipated that the base rate could fall as early as June, but higher than expected inflation numbers in the year to March mean that interest rates could stay higher for longer. Prices rose by 3.2% in the year to March, down from 3.4% in February, but higher than the predicted 3.1% .
Even though the base rate has remained unchanged at 5.25% over the past few months, fixed mortgage rates are influenced by ‘swap rates’, which are the rates bank pay to borrow from each other. When the wholesale borrowing costs rise, mortgage rates also go up, meaning steeper costs for homebuyers and those looking to remortgage, whereas when swap rate fall, fixed mortgage rates may also come down.
Swap rates have risen recently following predictions that the first base rate cut may be pushed back, which has led to all the major lenders including HSBC, Barclays, Santander and Halifax upping some of their mortgage rates. Smaller lenders are also gradually following suit, which means recent days have seen a flurry of rate increases.
Act now if you see a deal you like
Many borrowers might have been holding out for the Bank of England to cut rates, but given that this may not happen for months to come, it could be worth securing a rate sooner rather than later in case mortgage rates continue to rise.
Most mortgage and remortgage offers are valid for up to six months from the date they are issued, so even if your current deal lasts for a few more months, you can start your search for your next mortgage now.
It’s worth noting that if you do secure a rate in advance, you can still keep an eye on market movements. If you spot a better deal before your new mortgage is due to start you can review your options at this point and switch to the more competitive rate if you want to.
