February 6th, 2014
The Bank of England has again held the base rate at the record low of 0.5%, amid ominous news from economic forecasters about how long this can be sustained. Mortgage lenders who support contractors with competitive High Street rates have also this week continued to increase the pricing on their most popular deals, 5 year fixed rates in particular being the hardest hit.
Not a single week passes it seems, without news of positive economic growth figures closely followed by warnings about an unsustainable housing market and predictions about an earlier-than-expected rate hike. Contractor-friendly lenders like Halifax, Clydesdale Bank and Virgin Money have also hit Contractors with further rate increases as many clamour for longer term fixed deals to protect themselves for any pending base rate movement.
At the end of January, news agency Reuters conducted a poll of market analysts to ask them about their predictions for when the base rate will increase. Rather surprisingly, some very credible names predicted the rate would go up this year rather than the end of 2015, revising forecasts they had made at the end of last year. The Centre for Economics and Business Research (CEBR) made the bold prediction that the underlying rate would actually double to 1% by December 2014.
The predictions have been brought forward largely because unemployment has fallen dramatically, and Mark Carney (Governor of the Bank of England) stated that unemployment would be seen as a trigger for a rate increase. The news has affected the cost to banks of ‘buying’ money to lend for mortgages, particularly when the lenders themselves are guessing what will happen to rates over 3 – 5 years.
The outcome of this can be seen by news emerging from Clydesdale Bank this week, where 5 year fixed rates have been increased by up to 0.3%, the most dramatic shift in their rates since June last year. Clydesdale has traditionally been a lender that offers contractors the most appealing rate options, taking pride in a business model based on competitive product pricing.
“The fact that Clydesdale, a pillar of contractor lending, are no longer looking to offer the best fixed rates means that we are coming out of the bottom of the pricing curve for mortgage rates,” stated Mark McBurney, Senior Mortgage Consultant at Contractor Mortgages Made Easy.
“Any contractor who is looking to lock into a fixed rate that protects them from rate increases needs to identify options sooner rather than later, particularly those sat on their lender’s variable rate. The snowballing price of 3 and 5 year fixed rates is a trend that is based upon demand. It is simply not sustainable for lenders to continue to offer these rates at today’s pricing.”
Article By: Taj Kang, Business Development Director
Media Contact: Raman Kaur, Public Relations Manager
Tel: 01489 555 080