Q: What will uk mortgage rate be in 2010? There are so many factors to consider. Would you be kind enough as to give me some pointers as what to look for or avoid? A little advice would go a long way right now. I am very grateful for your help.
This is a good question. It’s impossible even for us to predict what mortgage rates will be next year. There are two things to consider – firstly, the Bank of England base rate, which is only 0.5% today. The conventional wisdom among economists is that it should stay low for another year or so, but that we should be very careful with this because as soon as the UK economy shows more solid signs of a recovery, the Bank of England has warned that this base rate will go up as quickly as it came down late last year. It went from a little over 5% down to the current 0.5% in less than four months. This is the rate that “tracker” mortgages are based on. Secondly, we are keeping a close eye on fixed rates as well. These are determined by something called Swap rates. Consequently, this can shift up and down, even if the Bank of England base rate doesn’t. We saw this go up two weeks ago amid tentative signs of a recovery next year, and sure enough all of the mortgage lenders have now increased their fixed rate offerings. The base rate remains at 0.5%. You asked about what to look for – if we start seeing broader signs that the recession is ending, then we should see the base rate start to go up, which will make tracker mortgages more expensive. However, people with mortgages should more importantly consider if they could afford a sharp increase in their mortgage payments. If you are stretched already at the moment, then it would be a mistake to lock yourself into a tracker mortgage, which is relatively cheap at the moment, because it’s possible that your payments could increase significantly. It would be better in that case to speak with one of your experts, who could tell you what a medium or longer term fixed rate would look like today. This way, you would be able to know where you stand and be protected against the inevitable rate rises to come. It’s not a question of if rates will go up, but more of when they will go up.These questions are for information purposes only and do not contain all the details you need to choose a mortgage, ask one of our advisers for a personalised key facts illustration