UK households have been warned that mortgage rates could rise again, especially if the Bank of England adopts a hawkish stance at this week's interest rate decision. The volatile situation in the Middle East and rising inflation, which hit 3.3% last week, are contributing factors.
While lenders such as Nationwide, Halifax, TSB, and Santander have recently reduced rates, experts caution that this trend may not last. Rachel Springall, Finance Expert at Moneyfactscompare.co.uk, described borrowers as being in a state of 'limbo', uncertain whether to lock into a fixed deal or wait for further cuts.
Springall noted that lenders' mortgage pricing could go either way due to swap rate volatility. She stated: 'Lenders will be watching the Monetary Policy Committee decision very closely, as it would be unwise to price deals too low in the short term. They will react if swap rates start rising significantly again.'
She added that base rate tracker mortgages currently look attractive but could be a gamble if interest rates rise this year. Choosing a deal with no early repayment charge (ERC) would be wise, she advised.
'Until the market sees more stability, there is very little scope for lenders to drop rates substantially due to prolonged unrest in the Middle East. Any borrower concerned about securing a mortgage should seek advice from a broker to navigate the mortgage maze,' Springall said.
Omer Mehmet, Managing Director at Welling-based Trinity Finance, commented: 'It's a difficult time for borrowers, without a doubt. Many will be looking at recent rate cuts and wondering whether they will continue.'
He suggested that those in the early stages of a house purchase or not due to remortgage for a few months could lock into a rate now and switch to a lower rate if rates fall before the transaction completes. Some borrowers are also considering an ERC-free tracker to get a cheaper rate today and then lock into a fixed rate if rates rise.
