Future Mortgage Rates

Maka344

Given that current 2 and 5 years fixed rates are around 4-4.5% with 25% equity, where do you see these fixed rates going if the base rate drops to say 4.25% by the end of the year - Will they remain where they are, or could they drop to around 3-3.5% under the same LTV?

I know we can't predict the market though, it is expected that base rate reductions are coming, thus, just trying to figure out potential costs etc. 

Mark_d

Personally I'm not expecting a change in the mortgage rates even though small drops in the base rate are predicted.

Hoenir

I wouldn't be surprised to see the negative differential between BOE base rate and mortgage interest rates progressively narrow. Ultimately borrowing rates will sit above BOE base rate. Over what time frame I've no idea. A decade of abnormal monetary policy isn't going to be unwound at the flick of a switch. 

fergie_

Its all about swap rates (with some provisos), so banks cut when swaps went down. This was on the expectation that rates would be cut to closer to 4% this year. That then became unlikely, so swaps and lending rates all went back up. Once BoE rates start to drop we will see swaps ease back again, but its going to take a long time for BoE to reach 4% or lower (unless there is another extreme event) so anything in the 3-4% range is likely to be a great mortgage rate for the next few years.

Arsenal2019

From what I’ve read in recent weeks, I don’t personally see a change for a couple of months 

zante_bride

I am wondering the same! I can’t put off choosing my next fixed rate any longer as it will double if I don’t fix. I am stuck between choosing a 1 year fix or 2. From what I have read they think there may be movement around June. I worry if I choose a year I could be coming off it around the time of an impending election that may cause more uncertainty and increases. What would you do at the moment a 1 year fix or 2 at 4.69%? 

Altior

Almost certainly in my view we'll be following the Fed. So BoE will cut just before or after the Fed do (if indeed they do cut this year). And they have more than half an eye on the presidential election, also in my view. 

Maka344

Question is whether to track or fix now. 

ReadySteadyPop

Fix now, can`t see FED or BOE dropping rates this year.

Hoenir

ReadySteadyPop said:

Fix now, can`t see FED or BOE dropping rates this year.

Not that Central Bank action correlates directly to mortgage lending rates. US fixed mortgage interest rates are nearer 7% currently. An indication possibly of what's to come. As the cheap money era continues to unwind. 

ReadySteadyPop

Hoenir said:

ReadySteadyPop said:

Fix now, can`t see FED or BOE dropping rates this year.

Not that Central Bank action correlates directly to mortgage lending rates. US fixed mortgage interest rates are nearer 7% currently. An indication possibly of what's to come. As the cheap money era continues to unwind. 

That`s right, the "10 Year Yield" is the one to watch, BOE isn`t really controlling mortgage rates.