Copy article

UK Mortgage Rates and Refinancings

Journalist: James Skinner, Pound Sterling Live

ended 16. June 2023

Hello all,

If anybody is able to help, I'd be very interested to hear today and on an ongoing basis about the impact that recent increases in interest rate swaps have had on mortgage rates and refinancings.

I'm interested in how all stakeholders in the mortgage market and/or services are being impacted but particularly the business side and consumer side. The impact on transaction volumes and also the extent of any affordability issues arising from the rates problem.

If anybody knows of the options available for those mortgage borrowers experiencing affordability challenges in light of the increase in rates this would be very useful context too.

Likewise, any background on the swap market and its role in the mortgage market would be helpful. If I understand it correctly, mortgages were priced directly off the BoE base rate prior to 1997.

Thank you for your consideration.

 James


 

 

2 responses from the Newspage community

Copy all

Copy

Premium
John Choong
Senior Equity Research Analyst at Investing Reviews
Mortgage approvals may have seen a decent rebound since bottoming out in January, but that was in part thanks to falling mortgage rates from their October highs. With the base rate now expected to hit 5.75% on the back of hotter-than-expected inflation and wage figures, mortgage approvals may be about to head back down following April's unconvincing numbers.
Copy

Scott Taylor-Barr
Principal Adviser at Barnsdale Financial Management
1997 was when the role of setting the base rate was moved from the Chancellor of the Exchequer to the newly formed Monetary Policy Committee of the Bank of England; removing it as a political tool and making it a more useful economic tool. The base rate is the rate the Bank will pay on money deposited with it; but only large Banks and other large financial situations can do that. This means all other lenders have to use secondary financial markets (like the old LIBOR or new SONIA rates), or their own customer's deposit funds. Swap rates have always been used for fixed rates, as they are the mechanism that allows a lender to fix the interest rate, it is only in the last 30 or so years however that fixed rates have become so popular, before then many mortgages would have been arranged on a discounted basis from the lenders Standard Variable Rate (fixed rates looked expensive by comparison); making homeowners more sensitive to base rate changes.