Once again this month the Bank of England Base Rate was held at 0.5%, but the ongoing chaos, panic and uncertainty surrounding the current debt crisis in Europe has been having a knock-on effect on the cost of mortgages.
LIBOR, the London Inter-Bank Offered Rate at which banks lend money to each other, has been rising over recent weeks and few months – reflecting the increased risk that banks are associating with lending to other banks in the current climate.
This is now starting to impact on UK borrowers as lenders have been pushing up the cost of tracker rate mortgages. Swap rates have also been creeping up recently which has had a similar effect on the price of fixed rate mortgages. Over the last week or so, lenders such as Nationwide, ING Direct, Abbey and Halifax have all increased rates on both fixed and tracker deals.
All in all, the trend at the moment is for rising mortgage rates, despite there still being no likelihood of a rise in the Bank of England Base Rate for the foreseeable future (the Bank’s latest inflation report, released on Wednesday, shows that markets expect interest rates to remain at 0.5% until Q4 2012).
If the situation in the eurozone calms down then we might see some rate cuts from lenders, but while the panic and uncertainty remains, borrowers looking for a new mortgage would do well to grab a deal now to avoid missing out on a low rate.
Why mortgage rates are rising
These 2 graphs show the recent rises in both LIBOR and swap rates – both of which have an impact on the mortgage rates charged by lenders.