Mortgages: 'Fixed rates could reach 6pc within weeks'

ad9898_3

Interesting article here, it seems that money is still very difficult to get hold of and, with the dead cat bounce that was happening over the Spring it seems that the banks don't want to be too competitive over mortgages. What I find intriguing is most fixed rates are set on the cost of money in the future aren't they ?, if so could we see SVR's rising in the next 12 months + ?

In my opinion this is where most of the carnage is 'hiding' at the moment, with many thousands unable to remortgage because of negative equity and others who are just 'hanging on' due to the very low SVR's out there. Time, as always will tell.

Lenders are now charging an average of 5.04pc to home owners who want to fix their repayments for two years, up from 4.92pc on Monday and 4.74pc at the beginning of last week.
The steep rise in the average rate seen in recent days has been driven by Nationwide's decision to increase the cost of some of its fixed-rate deals for the second time in two weeks.

Nationwide was followed by the Woolwich, which raised the cost of one of its two-year fixed-rate deals by 0.7pc, and other lenders are now expected to increase their rates again in the days ahead.
Darren Cook of moneyfacts.co.uk, the financial information group, said the cost of fixed-rate deals looked set to continue rising as lenders increased their rates so that they did not appear to be too competitive.

http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/5622101/Mortgages-Fixed-rates-could-reach-6pc-within-weeks.html

Generali

Swap rates are falling rather than rising:

http://www.swap-rates.com/UKSwap_extended.html

Banks are increasing their margins at the borrowers expense then.

That implies that demand for borrowed funds is greater than their supply.

The biggest part of the impact of QE AIUI should be that the money supply is increased via the banks - the banks receive money in return for assets they hold and then lend that out. Fractional reserve banking then does its magic and the money supply increases. However, if banks don't lend out the money (either because they don't want to or borrowers don't want it) then those funds won't increase the money supply, they'll just sit on the bank's books.

As the money supply doesn't increase, that reduces the funds available to be lent. It's sort of a self-fulfilling thing.

purch

Swap rates are falling rather than rising:

That's an interesting curve !!!

Not as steep as some would like to imagine.

As Gen say's QE clearly isn't having a huge impact on price or availability.

However, as we have learnt this week that the Bank is quite sanguine about QE funds leaving of the country, and the resultant selling of GBP bringing an economic benefit, it brings in sharp focus the huge differences that appear between what the BOE is trying to do with QE, and what the Treasury wants them to do !!!!

Jonbvn

Interestingly rates for savers seem to be increasing in the last few weeks. As an example, Newcastle BS have just released a 5% FR ISA.

This would seem to indicate that banks & BS are fighting for savers' money ATM.

maveli

A scare tactic by banks to get people out of SVR. The front runner is Nationwide. The rate will go up eventually. But in my opinion it will not beat BoE + <=1.00% SVR or tracker in the foreseeable future

chucky

Generali wrote: »

Swap rates are falling rather than rising:

http://www.swap-rates.com/UKSwap_extended.html

Banks are increasing their margins at the borrowers expense then.

That implies that demand for borrowed funds is greater than their supply.

for the 2 and 3 year's they may have been dropping but for the 5 year they've been creeping up since Feb.
i did a 5 year fixed rate deal then that was Libor at 3.18 +2.5%.

i'm looking at other re-financing and Libor's 3.66% now on the 5 year rates and the bank spread has increased to 3%.

Ad is right where he says that the banks, especially the bailed out banks are being forced to take a bigger spread against Libor. those that aren't being bailed out are just making extra profit.

in saying all of that BOE and mortgage rates are still historically very low and there are good deals at the moment.

Generali

chucky wrote: »

for the 2 and 3 year's they may have been dropping but for the 5 year they've been creeping up since Feb.
i did a 5 year fixed rate deal then that was Libor at 3.18 +2.5%.

i'm looking at other re-financing and Libor's 3.66% now on the 5 year rates and the bank spread has increased to 3%.

Ad is right where he says that the banks, especially the bailed out banks are being forced to take a bigger spread against Libor. those that aren't being bailed out are just making extra profit.

in saying all of that BOE and mortgage rates are still historically very low and there are good deals at the moment.

A good time to lock in a nice long fixed rate is right now I reckon. Interest rates could well look very different in a year or so.

chucky

Generali wrote: »

A good time to lock in a nice long fixed rate is right now I reckon. Interest rates could well look very different in a year or so.

and the difficult part is to factor house prices into this decision.

System

That's a big margin they are making at the moment.

If this really is because they predict rate increases then you can only assume any rate increases would be absorbed.

Thrugelmir

ad9898 wrote: »

. What I find intriguing is most fixed rates are set on the cost of money in the future aren't they ?

Majority are based on fixed term , fixed rate deposits.

Rates are rising as competition for depositors money is rising.

Generali

chucky wrote: »

and the difficult part is to factor house prices into this decision.

If someone is buying a house that is likely to be suitable for them for decades then frankly any losses they make are going to be realise over such a huge period that it really doesn't matter.

The trouble is, younger people in the UK often can't afford the house that'll be right for their family so they keep buying and selling and refinancing. That's where the risk lies as you may find house prices are low or high at an inconvenient time.