As we left the EU and being an England rugby fan, this has been a pretty tough weekend! Interest rates holding steady.

That said, I can bask in the glory of a correct prediction on the Bank of England meeting last week. So I’ll take a 100% strike rate on doing my job which is the important thing!

For anyone in doubt, please look up last week’s email. You can find that here with loads of other content. Well worth following us for literally market leading commentary. In fact a 7-2 vote to keep rates at 0.75% wasn’t even close in the end. The overall tone was far more optimistic than it has been, suggesting a rate cut is now off the agenda. You can read the full report here if you are that way inclined.

Interest rates going forward

So while I am feeling sagely, what do I think that means for interest rates going forward? As ever I bow to the markets. The day after the BoE held rates, 3 month sterling Libor (the key indicator of where mortgage companies look at for base rate predictions – also the silver line on the below graph) jumped to 0.764%, up from 0.692% just the day before (which will be reflected in next weeks chart). The key indicator here is that expectations are now for rates to rise, not fall. You can tell that as Libor is above the base rate. By the tiny margin above, the markets are only betting on a 5.6% chance that rates will rise in the next 3 months, however this is a key sea change in expectations. Interest rates holding steady, but just for now.

Mortgage rates going forward

The knock on impact of which I suggest is that mortgage rates will be heading north in the coming weeks and months. So if you are in a position to do so, I would secure/move on any rate you are currently being offered as I can’t see that going down anytime soon.

I had the pleasure of a meeting with Santander a few weeks back which gave me real insight into how banks view the market this year. They were very clear about their goal of maintaining or increasing their ‘Net Interest Margin’, or NIM. It is very challenging for lenders in an ultra low interest rate environment, so any movement up in money market rates as we will be seeing in coming weeks, I believe will be directly reflected in equally higher mortgage rates. So while prices are low on London Property and mortgage rates, the quicker you move, the more you will look back and commend yourself. Again, you heard it here first.

Rate Corner

As highlighted above, I suspect we are at the lowest end of the curve on this interest rate cycle. The graph above will be the real judge but from early signs post base rate meeting, rates are looking to creep up.

That said, in that same meeting with Santander they were at pains to say how they are open for business and keen to support brokers (as nearly 80% of their business comes via brokers like us). It is great having partners like Santander who are so open as it builds trust and just makes us able to advise our clients more accurately. I wish more lenders did this. Thank you again to the Santander for Intermediary teams for inviting me. So while rates may creep up, the support from lenders is very much there and most of the ‘big 5’ want to do more lending in 2020 than they did in 2019, Game On!

Best Rates:

2 Year Variable from 1.15%
2 Year Fixed Rates from 1.14%
5 Year Fixed Rates from 1.44%
BTL Rates from 1.35%
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 Feb 2020

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