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Broker warns mortgage rates may have bottomed-out already

Mortgage lenders may have been grabbing the headlines in recent weeks with rates below 4% but a broker has warned this is unlikely to last.

Mortgage rates provide a useful indicator of housing affordability and analysts and market commentators have been celebrating pricing falling from the peak of 6% last year to just below 4%.

But Richard Campo, founder of mortgage broker Rose Capital Partners has been tracking money markets and believes that mortgage rates have now bottomed out.  


He has warned swap rates, which are based on what markets predict the Bank of England base rate will be and help determine mortgage pricing, are actually now rising and could mean higher rather than lower-priced deals.

Swap rates data as of 23 February shows interest rates are expected to be 4.5% over one year and 4% over three years, up from 4.4% and 3.8% respectively.

In January, swap rates were at 4.2% for one year and 3.5% for five years so are actually rising rather than falling, which could influence mortgage rates and the wider housing market.

Campo said: "There have been some interesting movements in the money markets over the past week, fuelled by the sentiment that interest rates haven’t yet topped out in this cycle.

"This is going to have an impact on the pricing of fixed rate mortgages.”

He said he believes the Bank of England interest rates will go up again and potentially twice this year, which could push five-year fixed rate deals to around 4% to 4.5%.

Campo added: “Some lenders in the past week have thrown in all their chips in an attempt to secure new business by launching 3.75% five-year fixed rates.  

“They are now drowning in applications which they can’t process – a sure indication that they are keen to sign up the business before they have to start raising rates or pulling products, which some have already started to do.

“Those looking at taking a new fixed product with a rate that’s close to 4% (or below), should act now to secure it.  

 "As always, we don’t have a crystal ball so this is what I am suggesting from my reading of the money markets.  

“But, unless something changes geopolitically or economically I feel that, even if Bank Base Rate settles at 4%, then a five-year fixed rate at around 4% looks exceptional value.”


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