For many, this may have been missed last week as so much other stuff was going on, but the biggest indicator of where mortgage rates will go is often gleaned from the comments following the Bank of England meeting.

What came out of this meeting?

Interest rates were held at 0.1% unanimously, so it seems in the very short term there is no pressure to move interest rates in any direction. However, reading some of the comments and other action taken, it is clear that if interest rates are to move in any direction, it will be down and not up. The BoE increased its bond purchase scheme by £150 billion (to £875 billion in total), which is known as quantitative easing to some, or printing money to others. That does bring home the scale of the problems they think we are facing (and this also assumes a post Brexit free trade deal… fingers crossed…).

Inflation looks set to be very low (around the current 0.5% level) well into next year, which again places no pressure on moving interest rates up.

GDP is also set to fall now in Q4, to what extent and if that triggers a second recession is all very much unknown, but the outlook is far from bright for the economy as a whole.

There was a lot of positivity of the extension of the furlough scheme until the end of March next year, however, that coinciding with the end of the Stamp Duty holiday does create a bit of a cliff edge to the property market

Are negative Interest Rates more likely now?

In a word – yes. While there is no explicit mention of lowering interest rates or going negative, comments such as “further easing of monetary policy is warranted” will keep that debate high on the agenda. There hasn’t been enough time to see what, if any, impact that will have on money markets, and therefore mortgage rates.

That said, the driver on mortgage rates right now is capacity, and the lack thereof. So unless lenders manage to find a way to process applications more effectively, you could well see the situation where lenders are upping their pricing in more high risk areas such as those with smaller deposits and with credit blips. Which makes the negative interest rate debate a bit of a moot one in the mortgage world.

Bank of England held Interest Rates

Rate Corner

Money Markets all pretty much flat in the last 7 days. Not surprising as for most of the week there were a number of unknowns on the US election, Brexit & Lockdown 2.0, so nothing major…

Based on the earlier comments and the above uncertainty, keeping things short term looks the best bet for now

In the last week:
3 Month Sterling Libor = down by 0.003% to 0.045%
2 Year SWAP = up by 0.002% to 0.056%
5 Year SWAP = up by 0.019% to 0.200%
Bank of England Base Rate = Held at 0.10%

Best Rates

2 Year Variable from 1.19%
2 Year Fixed Rates from 1.04%
5 Year Fixed Rates from 1.32%
BTL Rates from 1.19%
The actual rate you will be offered will be dependent on your personal circumstance and deposit level. Please speak to one of our advisers so that they can guide you through this process
Source: Twenty7Tec November 2020


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