Are Interest Rates about to Rise?

I read a report on a mortgage broker news site yesterday saying that markets were expecting a Bank of England interest rate rise in April or May this year. This will of course have a knock on effect on the cost of borrowing from banks and building societies.

The rise(s) will likely be by a quarter of one percent each time so individually the changes will not be dramatic. However there are other factors that have given us historically low interest rates over the last few years.

Those with good memories will remember the Bank of England and UK Treasury Funding for Lending scheme launched in 2012 and designed to encourage lenders to lend to more households and businesses. The scheme (in my opinion) was a success and contributed to a prolonged period of extremely competitive lending in the UK.

There was also another scheme launched in August 2016 that flew somewhat under the radar called the Term Funding Scheme (TFS). This was part of a package of measures to help stimulate growth in the aftermath of the decision to leave the EU in 2016. This included the swift reduction of the Bank of England base rate to 0.25%, the measures “designed to provide additional support to growth and to achieve a sustainable return of inflation”. The target inflation rate being 2%. This TFS scheme comes to an end this month so that means banks and building societies will have to revert back to unsubsidised lending. Potentially this could mean an increase in rates.

Should You Secure A Mortgage Product Ahead Of Any Rise?

The article I read concluded that, assuming the above TFS is not extended, that rates will have to rise and that as mortgage brokers we should make hay while the sun shines. Certainly in the last year I have arranged mortgages with interest rates of under 1% over two years, I don’t think we’ll be seeing that again. Currently I think five year fixed rates do look good value for money with plenty of lenders offering sub 2% deals for five years.

If you are looking to arrange a mortgage now I’d weigh up your options and also consider what personal circumstances may change in the future when making your decision.

While, I would be delighted to help you find the best mortgage deal for your circumstances, I’m not going to scare you into acting today. Get in touch and we can discuss your options, stress test some product, and look at whether now is the opportune time for you to secure a mortgage (or remortgage).

Call us on 01252 759233 or email info@thesurreymortgagebroker.co.uk.

A MORTGAGE IS A LOAN SECURED AGAINST YOUR HOME OR PROPERTY. YOUR HOME OR PROPERTY  MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE OR ANY OTHER DEBT SECURED ON IT. 

Interest Rates...I may have been wrong!

I often tell my kids that they should hold their hands up if they are in the wrong, well it appears my recent blog about Bank of England interest rates may have been written in haste! If you must, you can read it here. In fact since publishing the last blog all the talk has been of an imminent base rate rise. Mark Carney even said as much last week.

So what of the outlook? Well the economists are saying a little rise in the interest rates will help in preventing the economy running away with itself, which will help keep a lid on inflation.

The MPC do not meet until November now so we have a bit of time to breathe and a bit of time for more news to counter the rise or add fuel to the talk of a rise. I have just received an email from Barclays saying they are withdrawing some of their headline fixed rate deals this week and they expect the replacement deals to be higher, this to me could be an indication that their boffins see a rise in the offing too.

Still, as the Bank rate is 0.25% right now and there are only two rate announcements left this year I’m going to stick with my original prediction of the year ending at 0.25%. In my corner we have had nine base rate meetings since the historic reduction of August 2016 and in all but three of those the votes were unanimous in keeping rates at the all time low of 0.25%. The last three meetings have seen two of the nine committee members vote for a rise to 0.5%. Will there be enough of a swing before the year is out to push the rate back up? I’m not convinced.

However, if the rate is pushed up it is only going to go to 0.5% and that is still very low, and given the huge uncertainty surrounding the economy at the moment I think the Bank will leave it alone at 0.5% for some time, if indeed they raise the rate at all.

In conclusion I may be wrong about interest rates staying put but please do not panic, I cannot see them going high, we are not in the 1990’s now.

Give me a call if you would like to discuss this further, and how it may affect your mortgage or your options for taking out a new mortgage. Please don’t hold me to any of my predictions though…!

Bank of England Base Rate - Don't believe the hype!

Last week the Bank of England voted to keep the base rate at the all time low of 0.25%; the rate it has been since the post referendum, recession avoiding drop of 2016. The voting was 7-2 in favour of maintaining the rate, this has been pretty much the pattern for the last year yet this time there was a lot of media noise about an imminent rate rise.

While I understand the need to have something to report I wholeheartedly disagree with the predictions of a rate rise in 2017. I have consistently maintained in previous blogs (go look!) that rates are not going to rise significantly given the economic climate.

Will Interest Rates Rise?

There are one or two indicators that suggest the monetary policy committee may lean towards a rise. The first is the level of employment, some good news statistics were released last week stating that employment has never been higher in the UK and those claiming unemployment benefits has never been lower. I remember a few years ago when Mark Carney suggested that rates might go up when unemployment fell below 7% and he quickly had to change tack when unemployment fell below that level. It just was not the right time to raise rates.

The other main indicator of a potential rate rise is inflation; again traditional economic theory suggests to kerb inflation you raise interest rates. I have to say this theory has carried less weight since the credit crunch of 2008, inflation has fluctuated up and down and interest rates have been broadly the same, suggesting to me that the decision makers are taking a more pragmatic view.

So why do I think rates are not going up? Again there are likely to be many factors that the decision makers take into account however as I am not one of those people I like to take a more simplistic outlook on these things.

Firstly as a nation we are pretty highly geared, what I mean by that is that we have enjoyed borrowing money in recent years, the low interest rates have fuelled a lot of borrowing and frankly a significant rise in rates would see a lot of us struggling. Put simply if you are paying more on your mortgage each month you are going to spend less elsewhere and I don’t think the economy can’t take that kind of hit.

Uncertainty fuels doubt in the economy and I think the post Brexit uncertainty has led to a fall in the housing market. I can only speak personally here but it just feels much quieter than it did 18 months ago. If the Bank of England put rates up, even by a little bit, that is going to add fuel to that uncertainty and the housing market may suffer more as a result.

Finally the main reasoning for my argument is wages. In previous blogs I have stated that only when wage inflation starts outstripping actual inflation will the Bank of England decide to raise rates. All you need to do is listen or watch the news to see that wages are most certainly not rising in line with inflation. The 1% pay cap on public sector employees for the last few years is going to take a bit of time to catch up with inflation, even if they get their 3+% this year. The headlines last week were that wages have actually fallen in real terms meaning we all have less money in our pockets. In these circumstances I think it highly unlikely that the Monetary Policy Committee will vote in favour of a rise.

If you’re concerned about interest rates and your mortgage, please don’t hesitate to contact me for an informal chat about your circumstances and to discuss your options.

What's the Property Market like in South West Surrey?

Thinking of buying or selling in South West Surrey this year? If so you’ll want to know whether now is a good time to get a mortgage deal, put your house on the market, and start your property search. Read on to find out…

The New Year is traditionally a time when the property market in South West Surrey – Farnham, Godalming, Haslemere etc. – starts to recover from the end of year lull. In fact the days between Christmas and New Year see a surge in visits to websites such as Rightmove as homeowners and new buyers use the holiday to start their property search.

This year appears to be no different with local estate agents commenting on the number of calls received by homeowners requesting valuations or expressing interest in properties in the first week of January. The market in South West Surrey is starting to pick up.

Should You Sell / Buy Now Or Wait?

However, property and economic experts expect the housing market to remain flat and growth to slow further this year – Royal Institution of Chartered Surveyors (Rics) predict growth in 2017 of 3%, compared to 6% in 2016.

Brexit and the changes to stamp duty rates continue to have an impact on the market, especially for buy-to-let and luxury homes, with buyers and sellers being more cautious.

Currently South West Surrey is experiencing a bit of a seller’s market. Estate agents in my hometown of Farnham have a shortage of properties at the moment, and many homes are being snapped up within days of coming on the market. Waverley remains a popular and desirable place to live, and homes do not hang around for long.

That said, if you also need to buy in the area you may find your options more limited but, as confirmed earlier, local agents are reporting an increase in requests for valuations as more homeowners prepare to sell.

Mortgage Interest Rates: When Will They Rise?

A good reason to act sooner rather than later is the expected interest rate rise. Currently at an all time low of 0.25% this has resulted in cheap mortgage rates for many, and a great opportunity to get a fixed rate mortgage before any increases.

Without the benefit of a crystal ball it is impossible to say whether interest rates will decline further, but indications are that they are more likely to increase this year. Fixed-rate mortgages are already cheaper than variable so it would seem prudent to get a deal now rather than later.

There are plenty of mortgage deals on the market with an interest rate of under 2%, with the right deposit. Even with just a 5% deposit you could get a rate of under 3%. We have also seen five year fixed rates creep below 2% recently too, again with the right deposit.

Start Your South West Surrey Property Search Today!

If you think 2017 is going to be the year you either buy your first property or move up, down, or sideways on the property ladder, here are your next steps:

Buyers

Mortgages: Get your financial affairs in order to ensure you get the best mortgage deals for your specific circumstances. A conversation with a financial advisor or mortgage broker is a good idea to discuss your situation and see whether there are opportunities to get a better offer.

Set up property alerts: Register with websites such as Rightmove, OnTheMarket and Zoopla and set up alerts for the area, price range, and type of property you are interested in.

Speak to local estate agents: Visit all the local estate agents, preferably in person, and register with them directly. Be clear about your position, they may contact you before properties appear on websites if they think you’re a good fit. Update them regularly about any changes – for example if you receive an offer on your house, or are able to increase your deposit.

Sellers

Finances: If you have a mortgage check to see whether you will incur any early repayment fees if you sell your house. Find out if your mortgage is portable if you want to move with it, or increase your borrowing. Now is a good time to look around at different mortgage products and see whether you qualify. Make sure you’re fully aware of the costs of buying and selling: conveyancing, moving costs, etc. If you are also buying there will be stamp duty to pay on your new property.

Valuations: Invite several estate agents to value your property so you can get fair market appraisal. Check out websites such as Zoopla to find out what properties have sold for in your area. Be realistic.

Prepare your property for viewings: Declutter and tidy, do those DIY jobs that you haven’t got around to doing, give your property a spring clean.

For mortgage advice and assistance – mortgages for first-time buyers, remortgaging etc. – please get in touch. My office is in Farnham but I look after clients across Surrey and West London. Call 01252 759 233 or email info@thesurreymortgagebroker.co.uk

BTW: if you’re a local estate agent in the south west corner of Surrey please let readers know your predictions for Q1 of 2017! Add a comment below…