To look at the picture over the past year or so, you’d be forgiven for thinking that rock-bottom mortgage rates were the new norm. Which indeed they were, with the vast majority of major lenders having slashed mortgage rates to all-time lows, resulting in a huge spike in borrowing accordingly.
Unfortunately, it was never going to last forever…even if it seemed like it might for a while. Spelling the end of a global era of ultra-low rates, banks and building societies across the UK and much of the rest of the world are slowly but surely increasing mortgage rates. To highlight just a couple of examples over the past couple of weeks, West Bromwich scrapped its market-leading 10-year fix, which charged just 2.59%, while Skipton increased certain mortgage rates by just under 0.4%.
Other lenders have also followed suit, including Virgin Money. Known to be one of the most affordable and accessible lenders for first-time buyers, a number of mortgage packages that previously asked just 5% in deposit payment now require a 10% deposit.
On the whole, industry experts have stated (and have indeed stated for some time) that in terms of it becoming more expensive to borrow cash to buy a home, it’s a definite case of when, rather than if.
But why is it that rates will and are already rising in some instances?
Well, it all comes down to the way in which mortgage rates in the UK are influenced in a big way by what happens in the rest of the world outside. Suffice to say, the surprise election of Donald Trump created the kinds of global shockwaves that are having a profound effect on global markets, which inevitably feed back to mortgage rates and interest rates in general in the UK.
Since the shock result was announced, mortgage rates have on average spiked by a pretty significant 0.4% in the United States, experts expecting British mortgage rates to increase at a very similar rate. In terms of when things will begin to take an even bigger turn for the worse, it’s largely expected that it will be a relatively slow and steady climb that won’t necessarily impact those looking to borrow over the next year or two too heavily. It’s simply a case of being aware that each of the records that were broken this year (in some cases interest rates lower than 1%) have been confined to the history books and aren’t going to be happening again in the foreseeable future.
On the plus side, interest rates on certain mortgages and financial products are still considerably lower than they’ve been in a generation. Which in turn means that for those looking to borrow or invest in the near future, the pickings are still more than rich enough to indulge. Procrastination, however, could see borrowers paying through the nose. The increases that are coming soon may be relatively minor, but they’re still increases. And they’re still coming…soon.