You've probably heard a lot about interest rate increases, so let's talk about the opportunity.
Due to inflation, there is a lot of discussion about raising mortgage rates. Although nothing is certain, most forecasters currently predict that rates will rise once in November, from 0.1% to 0.25%, and likely again in the first quarter of 2022. There are a few things you need to know to understand the concerns and opportunities that currently exist.
lowest ever
This all revolves around the Bank of England (BOE) benchmark interest rate. The base rate affects the mortgage interest rate that a lender offers to its customers. Inflation remains above the BOE's official target of 2%, compared with 3.2% in the last official report in August. Forecasters have suggested that benchmark interest rates will rise to cushion rising inflation.
First, let's talk about the base price. It currently stands at 0.1%, the lowest level in about 300 years. 
To give you some background, base interest rates in the 1980s ranged from 10% to 15%. Interest rates gradually declined to single digits in the 1990s, then the Great Recession in 2008 caused the BOE to decline most sharply, to 2.0%. That was incredibly low at the time. Since then, headlines have touted 0.75%, then 0.5%, then 0.25% hitting new all-time lows due to the global financial crisis.
What this means is that even if the BOE's benchmark rate rises from the pandemic emergency rate of 0.1% to 0.25% in November and is a bit higher in Q1 2022, it will still be 5-10 years ago. This is an unprecedentedly low level. . So even as we see worrying stories in the news and on social media, sensationalizing the increase and panicking about how homeowners and buyers will cope, there is no need to panic. There is no. With interest rates still some of the lowest in 300 years, mortgage financing is expected to remain very cheap for some time to come.
Added a little complexity
Let's talk a little bit about SWAP rates in case you want to know more. These are the interest rates that banks lend to each other and can go up or down based on what banks predict will happen in the market. These swap rates determine the mortgage interest rates that lenders charge on most fixed rate products. These swaps have increased by 0.2% to 0.3% in the last month alone, suggesting that financial markets are already pricing in higher interest rates.
Despite the increase in SWAP rates, our mortgage broker Alexander Hall recorded a combination of increases and surprisingly decreases in mortgage rates last week. Customers with smaller deposits have suffered from higher interest rates since the height of the pandemic as mortgage lenders deemed their mortgages to be slightly riskier, but rates are still trending lower. This highlights how confident mortgage lenders are in predicting the housing market and home prices. Alexander Hall found that for high-income earners, several major companies, including Halifax, HSBC and Barclays, all tightened their criteria to offer 5.5 times more income. The average house price is now more than eight times earnings, and this figure is even higher in London, so these changes to standards are positive for many prospective buyers. Therefore, despite expectations of higher interest rates, banks are likely to be reacting confidently to the real estate market, which is likely to persist in the coming weeks.
Now, take this opportunity…
The current base rate provides many people with the opportunity to take advantage of low mortgage rates, but even with the proposed increase in the base rate, the market as a whole will continue to have low mortgage rates from November onwards. It will remain widely available. Competition among lenders is expected to continue to be fierce, so there's still plenty of time to take advantage of affordable borrowing rates for those who haven't yet decided whether to move forward.
next step
A good mortgage broker, such as Alexander Hall, one of the UK's top mortgage brokers, will help you find the best of these competitive rates. If you want to buy your dream home at a low interest rate, contact Foxtons' team of real estate experts who can make your dreams a reality. With our proprietary technology and expert agents, we can help you make the most of current market conditions. If you're looking to move in the next few months, you can get the latest valuations from Foxtons to plan ahead for how well your property could perform in today's market.
