Since the Funding for Lending scheme was launched in summer 2012, high value mortgage rates have been gradually falling. Recent research from Moneyfacts revealed that the average interest rate on 60 per cent mortgage deals fell from 4.37 per cent last July to just 3.36 per cent this June.
Many high net worth mortgage borrowers have been holding off remortgaging or committing to a mortgage deal while rates have been falling. But, with recent volatility in the money markets and interest rates hitting record low levels, is now finally the time to fix your large mortgage? Keep reading to find out more about switching to a fixed rate large mortgage.
Record low rates and volatility in money markets could see large mortgage rates start to rise
The latest data from the Bank of England’s quarterly credit conditions survey showed a net increase in secured lending by more than 17 per cent of lenders, compared to a fall of more than 30 per cent in the second quarter of 2007. This, and other data, suggests that the bottom of the property and mortgage markets has passed and that both are set for recovery.
“Even though large mortgage rates have continued to fall in the last few months, it won’t take much of a recovery to start pushing up interest rates,” said Islay Robinson, CEO of London mortgage broker Enness Private Clients.
“Recent uncertainty in the money markets has already pushed up the cost of wholesale funding and with high value mortgage rates hitting record lows, it’s hard to see how mortgage deals can get much cheaper. It therefore looks like a good time to finally commit to a medium to long term fixed rate deal,” he added.
In just one week in late June swap rates – the rates at which banks lend to one another and closely linked to mortgage rates – rose by around one quarter. While they have eased slightly in recent weeks, it shows that it is unlikely to take much for mortgage rates to start to rise again.
What’s the benefit of a fixed rate large mortgage?
With high value mortgage deals also hitting record lows it seems like the only way is up for interest rates. It’s now possible to fix for two years at under 1.7 per cent while many private banks are offering LIBOR linked products at around 2 per cent to high net worth mortgage clients.
“Over the last couple of weeks lenders have been introducing more high loan to value deals to their range and so it seems as if competition is shifting from high net worth mortgage borrowers to first time buyers and those people with a smaller deposit,” added Mr Robinson, the million pound mortgage specialist.
“With fixed rates already at record lows, it is hard to see how lenders can offer deals that are any cheaper. So, it looks increasingly likely that rates may have bottomed out and that large mortgage borrowers should seriously consider committing to a cheap fixed rate deal.”
Derek Gair, partner of Hampshire-based GDC Associates, said: “I think any recovery is set to be weak, and I don’t see the base rate rising any time soon. Any rise could cause huge amounts of damage.”