10/06/2022
Why are mortgage rates increasing?
Banks borrow from other banks and the rates of interest that they charge each other are known as “swap rates”. The swap rates determine how much a bank buys the money for and then how much they sell it on to their customers via their mortgage interest rates.
Banks, like all businesses, need to make a profit, so they will add a margin. As of December 2021, 2 year fixed rates were available for the bank to buy at around 0.98%. The bank would then add their margin and lend this money via a mortgage at say, 1.50% for a 2 year fixed deal for example, so their profit margin in this instance would be 0.52%.
What has happened now, is that the cost at which the banks are buying the money has increased. As of this week, the same 2 year fixed money is costing the bank around 2.67%. They then add their margin and this is putting up the rates available to borrowers.
Unfortunately, it is a moving target and so it is extremely difficult to predict what is going to happen, but it is anticipated the rates will continue to increase.
We used to receive ample warning from lenders of impending rate rises, but now we are finding rates are rising without any notice at all.
If your current fixed rate expires in the next 6 months, consider your options sooner rather than later. We can secure rates with full applications up to six months in advance of completion (subject to underwriting), with a selection of lenders. If you cannot move to a new lender, we can look at rates available with your current mortgage lender up to 3-4 months early.
Please reach out if you have any questions, we are happy to chat.
🔴Your home may be repossessed if you fail to keep up with your mortgage payments🔴
