Is the End for Cheap Mortgages Near?

Even though mortgage rates have fallen in recent weeks, observers say that the era of cheap mortgages could soon be coming to an end.

After the expected increase in rates did not eventuate in mid April, two year swap rates have fallen according to mortgage brokers SPF Private Clients.

Falls in interest rates are generally preceded by falls in swap rates, the rates at which banks expect to be able to borrow or lend within a set period.

Five year and two year swap rates have fallen since mid April with the two year rate falling from 1.12% to 0.89%.

Rate reductions from Atom Bank, Bank of Ireland UK, Post Office Money, Sainsbury's Bank, Newcastle Building Society and Yorkshire Building Society followed.

According to Mark Harris of SPF Private Clients:

"Swaps will continue to move up and down as the market attempts to predict the future path for interest rates. Clearly the trajectory for interest rates is upwards but by how much and at what pace is much harder to forecast.

“The UK mortgage market is highly competitive and over supplied in certain areas – this is the main downward pressure on mortgage rates.”

Aaron Strutt of Trinity Financial does not anticipate further falls in rates:

“We have been at this point before, but rates are unlikely to get much cheaper unless an incredible one-off deal comes out of nowhere,”

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