Will mortgage rates rise? Budget sees the swap interest rate rising

  • Mortgage pricing is largely based on the Sonia swap rate, which rose post-budget

Mortgage costs could rise after Rachel Reeves’ budget led to a spike in swap rates, which affect the pricing of fixed-rate mortgages.

The pricing of fixed-rate mortgages is largely based on the Sonia swap rates – the interbank rate, based on future interest rate expectations.

When the Sonia swaps rise enough, this often results in a rise in the fixed mortgage rate, and vice versa when it falls.

As of today, five-year swaps have risen to 4.04 percent, compared to 3.87 percent on October 29, the day before the budget. They are up from 3.7 percent a week earlier.

We are going up again: if the swap interest rate remains at the same level, there is a good chance that the mortgage interest rate will rise

The lowest five-year fixed rate mortgage is currently 3.79 percent – ​​and it’s rare for the lowest rate to be below equivalent swaps like it is now.

Only three major mortgage providers have announced interest rate changes since the budget.

Virgin Money and Halifax have both announced they will increase rates, while Santander has gone the other way and said it will cut rates.

If swap rates remain at current levels, mortgage rates are likely to rise, said Mark Harris, CEO of mortgage broker SPF Private Clients.

“Swap rates rose on the back of the budget, but this could be a knee-jerk reaction rather than a sustained period of higher interest rates,” he said.

“Only time will tell: if swaps remain at elevated levels for a while, lenders may have to reprice at a higher rate.”

‘Lenders have adjusted their prices this week: some are raising rates, others are lowering prices to attract new customers.

‘Borrowers looking for a mortgage should plan ahead and speak to a broker from across the market to find the best deal available to them.’

Nicholas Mendes, mortgage technical manager at John Charcol, expects this to be a short-term problem. He expects mortgage rates to fall in the coming months.

Mendes predicts that the lowest mortgage rates could fall to around 3 percent next year.

“From a mortgage perspective, any immediate post-budget rate changes are unlikely to change the medium-term trend of base rate cuts, although they could influence the pace of cuts,” Mendes said.

‘I expect the downward trend in mortgage rates to resume before the end of the year and likely return to the best rates we have seen recently, with further improvements next year.

‘However, it is essential for borrowers to remember that the current fixed mortgage rate already takes into account a number of expected reductions in the base rate over the coming year.

“That’s why I expect the lowest fixed interest rates to stabilize around the low 3 percent mark next year.”

How do you find a new mortgage?

Borrowers who need a mortgage because their current fixed rate agreement is ending, or because they are purchasing a home, should explore their options as soon as possible.

What should I do if I need to take out a new mortgage?

Borrowers should compare rates, talk to a mortgage broker and be prepared to take action.

Homeowners can sign a new deal six to nine months in advance, often with no obligation to enter into it.

Most mortgage agreements allow fees to be added to the loan and will not be charged until closing. This means borrowers can secure a rate without paying expensive arrangement fees.

Please note that if you do this and do not repay the fee on completion, interest will accrue on the fee amount for the entire term of the loan. So this may not be the best option for everyone.

What if I buy a house?

Those with a home purchase agreement should also aim to secure rates as quickly as possible so they know exactly what their monthly payments will be.

Buyers should avoid overextending and be aware that home prices may fall as higher mortgage rates limit people’s borrowing options and purchasing power.

How to compare mortgage costs?

The best way to compare mortgage costs and find the right deal for you is to talk to a broker.

This is Money has a long-term partnership with free broker L&C to provide you with expert mortgage advice free of charge.

Curious about today’s best mortgage interest rates? Usage This is the best mortgage interest calculator from Money and L&C to display deals that suit your home value, mortgage size, term and fixed rate needs.

If you’re ready to find your next mortgage, use L&C’s online Mortgage Finder. It searches thousands of offers from more than 90 different lenders to discover the best deal for you.

> Find your best mortgage deal with This is Money and L&C

Please note that rates can change quickly. So if you need a mortgage or want to compare rates, contact L&C as soon as possible so they can help you find the right mortgage for you.

Mortgage service provided by London & Country Mortgages (L&C), authorized and regulated by the Financial Conduct Authority (registration number: 143002). The FCA does not regulate most Buy to Let mortgages. If you do not make your mortgage repayments, your home or real estate may be seized