Fears are growing that a continued decline in oil prices could see mortgage rates rocket.
In the past six months, the price of Brent crude oil has more than halved from around $112 per barrel in June 2014 to roughly $47 per barrel today.
Mortgage rates are at all-time lows at present, with competition fierce among lenders, but experts warn oil price falls could ultimately push up mortgage rates.
Precise Mortgages managing director Alan Cleary says the problem is “global” and not restricted to the major oil-producing economies. As a result, he says, swap rates could spike, causing the price of fixed rates to rise.
Writing for Mortgage Strategy this week, Cleary says: “I could easily foresee a situation where ultra-low petrol prices may make us smile at the pumps but hit swap rates hard, forcing up the cost of fixed-rate products.”
Your Mortgage Decisions director Dominik Lipnicki agrees.
He says: “I agree to the extent that the oil market slide will have a knock-on effect for other economies and in the short term that could well see our mortgage prices increase.”
Middleton Finance managing director Daniel Bailey says other factors could also affect mortgage pricing this year.
He says: “Lenders have started the year with some really strong products on offer and clearly have good targets for lending in 2015.
“That said, continued uncertainty in global markets, the eurozone, fears about the general election and other factors will always impact how lenders feel about risk.
“Falling oil prices have a huge impact on the global economy. If they continue to slide then yes, you would think swap rates will fluctuate and lenders will have to have a rethink about rates.
“If this oil market depression continues, I agree we could see mortgage pricing rising.”