Forbes rates article

Bank rate predictions for next year are tending to fall somewhere in the 4-5% bracket. This is expected to be relatively short term with a target bank rate of close to 2.5% in the long term. This means that anyone looking at any kind of new mortgage rate for the next year or so, whether that be on a purchase, or a renewal basis is likely to be paying a fair amount higher than what they've been used to for a while now. Some conversations we're having with clients include options around tracker rates, as well as longer mortgage terms and interest-only if viable, all of which should go some way to helping reduce the impact in the short term. Budgeting and planning is at the forefront of any advice process. It's time for people to start looking at their situations earlier than normal to ensure they're not stuck later on.

The MPC implied yesterday that the market expectation of 4.75%-5% base rate peak should probably be revised down based on the data that had been reviewed in this month’s meeting. With a long period of recession, resulting in a possible doubling of unemployment over the next 18 months, it feels like the peak could now be closer to 3.75% to 4%. Whilst this means borrowers on variable rate mortgages will have to brace themselves for a further increase – most likely to come early in the New Year – they can take some solace that it should be the last rise for the foreseeable future. Another upside from yesterday’s announcement is that we’re likely to see Swap rates continue to drop from their most recent peak in October. This should mean that many people looking to insulate themselves against the next rate rise will be able to do so at a more affordable cost of borrowing. It may take a week or two for this softening of rates to feed through to the market and in fact, some lenders may wait to hear what the chancellor has to say on 17th November, but it certainly seems like a positive adjustment is on the way. In summary, my advice for anyone concerned about the cost of their mortgage is to speak to an experienced broker. Now more than ever, bespoke advice is the key to ensuring you navigate through this challenging economic period.

With arguably the longest ever recession looming, the Bank of England's ability to keep applying the brakes appears to be a challenging one. With a margin of circa 2% between a tracker and fixed rate (even considering the 0.75% rise), it may be a calculated risk for a customer if they have headroom in their affordability to go onto a tracker mortgage. Some commentators now see a peak of Bank Rate at 4.5%-5%, distinctly different from the panic caused by the Truss administration.

The base rate is likely to continue to increase in 2023 with it predicted to peak around 4-5% instead of the 6% we were looking at just after the summer. To clients that are coming to me worried about increases to their mortgage repayments, I am advising them to be prepared and get ahead of the curve. If you know what you are likely to have to pay when your rate changes why not start overpaying your mortgage now to bring down the balance when you get there or think about what items you can cut down on now to give you a higher disposable income. There is also the possibility to extend the term of your mortgage or go interest-only for a short time if underwriting allows but these need to be decisions you make with an expert so you don't find yourself in a worse position in a few years' time.

For a lot of clients the fixed rates currently on offer look really spicy when you compare them to trackers and discount variable rates. Even if you factor in where the BOE say base rate will peak at, these still look like they may well be cheaper. My advice is to really explore whether the alternatives to fixed rates might be right with your clients because sticking someone on a 5 year fix at something pushing 6% might not be the right thing to do. One size definitely does not fit all.

Its very unlikely that we have seen the end of base rate rises just yet, I am expecting more to come. However the speed and severity will very much be dictated by inflation and economic figures in the coming months. Given the large gap between fixed rate and variable rate mortgages at present, many of our property investor and business owner clients are considering variable rates. In many cases the base rate would have to go above 5% before its more expensive than the fixed rate. In a high interest rate climate like this, its important to concider all available options and not nessiccarily just fixed rates.

Mortgage rates are likely to level off or reduce as most banks were expecting a sharper increase with the base rate a few weeks ago. The sentiment has changed now that Rishi is the UK prime minister. If you have recently submitted a mortgage application, I would advice that you review this regularly before completing as there is a possibility that the rate today could be lower than one secured in the last month. A lot of morgage lenders have responded with reduced rates over the last couple of days.

Following their 0.75% hike this week, the Bank of England seem keen to dampen down expectations of further rate rises. Predicting the UK's longest ever recession would usually be a pre-cursor to a series of interest rate cuts rather than hikes. At very least, base rate looks set to rise slower than many expect, and an ongoing recssion is likely to see cuts at some point, especially if inflationary pressures start to ease.

Most likely there will be one more base rate rise next month and then the Bank of England will see how this impacts the economy. Now more than ever, it is vital that borrowers seek professional advice from mortgage brokers when it comes to their mortgage needs. Avoid looking at news articles that don't have a mortgage broker quoted, and avoid social media posts that is not from a mortgage broker,

Base rate has always going to head north, the Bank of England always told us that the sub-1% world was economic support for a post-financial crash market, which then became a form of pandemic support. The Bank's plan was that base rate would move upward gradually over a few years. Inflation due to the supply chain shortages from COVID, followed by surging oil, gas and wheat prices courtesy of Russia's invasion of Ukraine, plus a final push from the previous Chancellor, saw the Bank's original plans dashed and we have shot up to a 3% base rate. However, this is still 2% below where the base rate was prior to the financial crash in 2007, so from a central bankers macro-economic view, we're still in a low rate environment and just heading towards a normal place for the base rate sometime in 2023. For a generation of home owners who have only ever known a base rate of under 1%, that is cold comfort, as rates now look incrediably expensive compared to what they have been used to.

We are hoping not to see to much of a change with fixed rates in the near future, many lenders factored in a raise in base rate with their last movement and the swap rates reflected that. Fixed rates being high and the instability of variable rates but many people are over looking products such discounted rates with could work out cheaper if they fit your circumstances.