The Council of Mortgage Lenders (CML) has announced that the affordability of mortgages is at a “historic low”.
The reason for the expected rise in interest rates is, according to Jones, because of the election of Donald Trump as President of the United States. Trump has announced tax cuts and a large increase in infrastructure spending on roads, tunnels, bridges, airports and railways. Financial experts predict that this will cause the Federal Reserve to significantly raise interest rates and this could affect UK mortgage rates.
The swap rate is what banks use to borrow from each other, and this influences the mortgage interest rates. Since Trump was elected, the swap rate has risen sharply, and this may increase mortgage rates.
The average interest rate for a five-year fixed mortgage is now 2.98%. This compares to 3.93% in November 2014, and 4.68% in November 2011. People who can afford a large deposit can find a five-year fixed rate mortgage under 2%.
Some mortgage lenders make their mortgage offers valid for three month to six months. This means that if the mortgage rate goes up, then the mortgage offer remains at the lower rate. If the rate goes down, then some lenders will allow borrowers to switch to the lower rate.