After a period of relative stability, global events are once again creating uncertainty in financial markets – and that could affect UK mortgage rates. Read on if you’re due to remortgage this year.
The apparent collapse of the ceasefire between the US and Iran could cause instability. As markets react, oil prices have risen, and the 10-year gilt yield has reached its highest level in a month. This basically means that investors are demanding a higher return to lend money to the UK government because the economic outlook has become uncertain. Gilt yields affect swap rates, which lenders use to price fixed-rate mortgages.
If swap rates increase, it becomes more expensive for lenders to fund fixed-rate mortgages, and those additional costs can eventually feed through into higher mortgage rates for borrowers.
Haven't mortgage rates been falling?
In recent months, we've seen many lenders reduce their fixed-rate deals, providing welcome relief for homeowners and buyers.
However, earlier this year, when tensions in the Middle East first escalated, many lenders quickly withdrew products and repriced mortgages within days. While nobody can predict exactly what will happen next, the latest developments have increased the likelihood that mortgage rates could begin edging higher again if market uncertainty persists.
What about inflation?
Rising oil prices don't just affect the cost of filling up your car.
Higher energy prices can increase the cost of transporting goods, manufacturing products and running businesses. Those additional costs often feed into higher prices for consumers, contributing to inflation.
If inflation remains stubbornly high, the Bank of England may decide to keep interest rates higher for longer or even increase the base rate to help bring inflation back under control.
With the next Bank of England base rate decisions scheduled for 30 July and 17 September, financial markets will be watching developments closely. The base rate has remained the same since last December. However, decisions are always finely balanced.
What if you're remortgaging?
If your current mortgage deal is due to end later this year, now is a good time to review your options.
Securing a new mortgage rate early can help protect you if rates rise before your current deal expires. In many cases, lenders allow mortgage offers to be secured several months in advance.
Lock in your mortgage rate early
Even better, if rates improve before your new mortgage completes, we'll review the market and, where possible, help you switch to a lower rate at no additional cost.
While no one can control what happens in world markets, you can take steps to protect your own finances.
Reviewing your mortgage early gives you more choice, more flexibility and greater peace of mind, whatever happens in the weeks ahead.
If your mortgage deal is coming to an end, or you'd simply like to understand your options, we’re here to help.