Swap rates in-creased recently and sentiment won’t have been helped by the release of the Monetary Policy Committee’s minutes for October’s meeting.These indicate a split decision on whether rates should be held or raised, and while the decision to hold was carried by a majority of seven to two there is mention of how the decision was finely balanced for most members. Two-year money is factoring in a couple of interest rate rises so it was inevitable that fixed rate pricing would be affected. Deals have either been withdrawn without replacement or rates have risen. There’s no point in clients hanging around if they are considering taking a fixed rate product. There is only one way that fixed rates are likely to head but many deals still look attractive. Due to the competitive market, fixed rate deals are still priced well below market rates. In fact, longer term market rates are lower than shorter term ones so five-year fixed rates could be of interest to clients. With a base rate rise in November looking a cert there is a question of what impact it will have on the market. The rosy view is that the last increase made little impact and the market has continued to push on. It may be that it will take a little while for the effect to filter through but rising energy costs coupled with higher mortgage rates could be enough to start to tighten a few belts and put a brake on house price inflation. If there were to be a further rate increase relatively early next year it would send a clear message and rock consumer confidence. Any rate rises will be another blow to first-time buyers who face increasingly difficult prospects. Although the figures don’t tell the whole story, increasing rates will come as another blow to first-timers who are the lifeblood of the housing market. All this should lead to the conclusion that the housing market will flatten next year – but that’s what everyone thought would happen this year. Lack of housing supply continues to keep the market smouldering and modest rises in the base rate may not dampen it much.
Recent weeks have seen plenty of product withdrawals from a number of lenders, predominantly on the fixed rate front. This has been precipitated by the rise in money market rates filtering through and affecting the pricing of products.