Mortgages fall to record lows

With the average mortgage rate falling in the second quarter of this year to 2.56 per cent, according to the Financial Conduct Authority, both fixed and variable rates are on the slide.

The fallout from the referendum result led to the Bank of England cutting interest rates last month by a quarter point to 0.25 per cent, after seven years of base rate sitting at 0.5 per cent. Swap rates – the rate banks pay to lend to each other – have been at all-time lows, enabling lenders to offer exceptionally cheap mortgage rates. Moreover, the fall in value in the pound has made acquiring sterling-denominated assets such as property more attractive to those with cash held overseas in a foreign currency.

Fixed-rate mortgages offer particularly good value, with two-year fixes pegged at less than 1 per cent, five-year fixes at less than 2 per cent and ten-year money from less than 3 per cent. For those looking for certainty, these represent extremely good value for peace of mind. There have been concerns that lenders would scale back their lending or tighten their criteria following the UK’s decision to leave the EU but this hasn’t been the case. As far as lenders are concerned, it is business as usual, with the terms and rates on offer from the private banks as attractive as ever.

While some of the big banks may pull back at some stage and take stock given their exposure to all property asset classes and other types of lending, the specialist residential players may see this as an opportunity to grab much-needed market share. Borrowers shouldn’t panic but it is worth seeking independent advice and find out what options are available to you.

By Mark Hampton - Director, SPF Private Clients