The beginning of October has seen an increase in mortgage rates by at least ten of the UK’s lenders, including such big names in the financial markets as Halifax and Nationwide. This move has been made in expectation of an increase in the leading Bank Rate by the Bank of England. This has had an exponential effect on mortgage deals, not only in the capital, but nationwide.
Fixed rate deals and their effect on the London housing market
Sadeq Rahman, estate agent in Bow, says “Fixed rate mortgage deals have been very popular, especially in the East London property market, as borrowers are keen to set in a locked rate for up to five years so that they can budget more effectively for their housing costs. For months, rates have been at a record low, however with expectations of a Bank Rate increase, the biggest lenders have started making moves to raise their own rates. This is prompting many buyers to jump on the ultra-low rate bandwagon while they still can.”
The potential snowball effect
As the largest building society in the UK, Nationwide, raises its rates on its lowest cost 2-year fixed mortgage deal, a snowball effect may be looming on the horizon. While the current increase is small (up to 1.44% from 1.19%), where the leading names in the industry go, other lenders are sure to follow, and there is a good chance of other financial institutions following suit.
What does this mean for the Bow property market?
Anyone looking to buy property in Bow should consider acting quickly to benefit from the low fixed rate. With fixed rate mortgages being dependent on swap rates, the news that the last 12 months have seen the swap rates for both 2 and 5-year loans almost double is also likely to indicate that there will be an imminent increase in fixed mortgage rates. The good news for London buyers is that there are still some excellent deals available, but swift action will be necessary to benefit. Experts believe that the Bank of England will be posting their first increase for over a decade within the next month, so arranging a fixed-rate deal as quickly as possible is imperative for anyone who wants to maximise their investment when they buy property in East London.