Homeowners looking for a mortgage could be lucky short-term winners off the back of Britain’s decision to leave the European Union with experts predicting a rush of rate cuts as early as next week.
While stock markets have been left reeling in the wake of this morning’s referendum result, homeowners are being told their cost of borrowing is going to stay at rock bottom for the foreseeable future.
Ray Boulger said: ‘While I don’t expect any changes in lenders’ standard variable rates, I think we are likely to see more lenders joining HSBC in offering sub-2 per cent five-year fixed rates, probably as early as next week.’
His reasoning follows a notable drop in UK gilt yields – effectively the cost of borrowing for the UK Government – which have fallen back to the all-time low hit towards the end of last week when the polls indicated a move towards leave.
These heavily affect money market borrowing costs in the form of swap rates, which in turn influence fixed rate mortgage prices.
Boulger said: ‘Bank rate and other short-term interest rates are unlikely to change much, simply because they are already close to zero, but the fall in gilt yields will reduce the cost for lenders of longer term funding and hence open the door for even cheaper fixed rate mortgages.
‘Most mortgage lenders didn’t pass on much of the pre-referendum fall in rates and so we can now expect to see more price competition, especially in the longer term fixed rates.’
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