We are delighted to see mortgage rates plunge to even greater depths, across the board. With interest rates at 0.5% and not appearing to be moving anywhere fast, borrowers on standard variable rate mortgages are still enjoying incredible low borrowing costs.
Meanwhile those with fixed rate deals are delighted with a lender price war in full flow causing rates to plummet.
Rates have been falling on all fixed rates across all loan to value ratios and are plummeting to levels never before seen.
Barclays has even taken the extraordinary step of slashing rates on 10 year fixed rate mortgages to under 3% for some deals.
A few years ago it was shocking to see any fixed rates below 2% but now we are entering a new era of extraordinary low rates.
The Bank of England is indicating base rate could stay low for as long as 15 years and by low we presume they mean somewhere under 3%.
It is fair to say that low interest rates are the new normal and Bank of England governor Mark Carney is a chief supporter of dovish policy.
Base rate has been locked at 0.5% since March 2009, coming up for six year, an incredible length of time unprecedented in UK economic history.
We hear from the Bank’s monetary policy committee that low inflation means there is no rush to increase rates any time soon.
But we are not economists and have no idea when interest rates will rise or what economic shocks will hit the UK economy.
Falling oil prices, for example, are having unpredictable consequences on mortgages, jobs and inflation. This week, we saw the Swiss currency crisis plunge banks, companies and investors into chaos in a clear example of the unpredictability of markets.
Nobody can know what the future holds but what does seem certain is that Mark Carney has through his indication, will be leaving the Bank of England in 2018. There will therefore be an entirely new panel of rate-setters at the monetary policy committee meaning any predictions for 15 years hence,( ie 2030) are faintly ridiculous.
New policymakers will have new priorities and it is impossible to predict so far into the future.
However, the Bank’s loose position is reflected in cheap 10 year fixes and other longer deals trying to lock borrowers into paying a slight premium for certainty on their mortgage payments.
As mortgage advisers we can provide expert advice on whether such deals would be suitable for you as there are lots to consider.
Rates are only one aspect of a mortgage deal and other features such as term length and flexibility could come into play.
As a rule of thumb we say that if you want certainty over payments for a fixed period of time then a fixed deal is for you, but you are likely to pay slightly more than a variable or tracker rate.
If you are more flexible and could cope with an increase in rates, then perhaps a variable rate is best for you.
Each deal depends on specific circumstances and with a mortgage being the most significant outlay of your life and such a complex area, it may be best to seek professional advice, from us or others.