Published On: Mon, Aug 8th, 2016

What next for mortgage rates: Record low deals on offer to homeowners, but will Brexit mean rates start to go up?

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HOUSE3By SIMON LAMBERT

Markets went into turmoil following the momentous decision by the British people to leave the European Union on 24 June 2016.
Investors panicked, sending share prices spiralling downwards, gilt yields collapsed and the Bank of England said it will consider extraordinary measures to protect the finances of British citizens.
But what does all of this mean for mortgage rates, which have been steadily falling over the past month to record lows?
In reality, fairly little – for the moment. Some are predicting that rates will remain at rock bottom for the foreseeable future while others caution that lenders may start to hike rates if market volatility sticks around. Fundamentally, competition among lenders continues to drive down mortgage rates at all deposit levels, but borrowers will find a potential big difference in the size of the loan that banks or building societies will offer them.
This makes shopping around and speaking to a good mortgage broker a wise move. You can check best buy tables and the best mortgage rates for your circumstances with our calculator powered by London & Country. What are the best deals?
It is currently possible for those with the biggest deposits to fix for five years below 2 per cent, while those with 10 per cent to put down can fix for five years at just under 3 per cent.
For two-year fixes, the lowest rates are now less than 1 per cent if you have a big deposit and 2 per cent if you have just 10 per cent.
Until fairly recently economists and markets were pricing in the first interest rate rise in the UK in late 2017 but following Britain’s decision to leave the EU, many are now predicting that the Bank of England could now cut the base rate below 0.5 per cent where it has been since March 2009.
Those looking to buy a home or remortgage will find that now is a good time to look for a home loan, with record low mortgage rates on offer.
Many are still being nudged by brokers into taking out two-year fixed rate mortgages, yet it is wise to question if this is the best move.
The attraction of a two-year fix may be lower rates now and extra flexibility, but that comes at the expense of needing to remortgage in two years to avoid slipping onto a more expensive standard variable rate.
That is particularly relevant in light of recent events. Post-referendum experts are predicting that lenders will leave standard variable rates on hold but are likely to cut longer term fixed rates in the coming weeks.
A five-year fix gives the opportunity to lock into a low rate for a longer period and avoid extra fees and higher rates in a relatively short time.

What is happening with rates?
Poll
How long would you fix your mortgage for?
Two years
Five years
Ten years
Don’t take a tracker
Prospective rate rises have been pushed into the distance by overwhelming uncertainty following the shock result of the EU referendum.
This is on top of already low inflation, slowing world growth, the oil price slump, the eurozone’s continuing woes and lots of other things that keep central bankers awake at night.
On the flipside, the US raised interest rates in December last year, and the Bank of England’s deputy governor Ben Broadbent has warned people not to rely on market forecasts that have pushed a first base rate rise way into the future.
A gloomy start to 2016 saw stock markets slide and stalled further expected US rate rises. In the UK, uncertainty over the Brexit referendum and the troubled outlook for Europe’s economy has kept rate expectations down.
Just days before Britain voted to leave the EU, US Federal Reserve chair Janet Yellen said fears over Britain’s exit had factored in the decision to keep US rates on hold – a signal that the outlook now looks more uncertain.

What next for interest rates? Our look at when the Bank Rate may rise
Can you get a mortgage?
Banks and building societies have broadly got to grips with the tougher new mortgage rules introduced in April 2014.
These produced a marked slowdown in lending and home sales but transactions have now risen back towards the level they were at previously.
Getting a mortgage is tougher though. You will need to get your finances in order and be prepared for the lengthier application process and in-depth affordability interviews getting a mortgage requires nowadays. Lenders also apply different standards to what they will lend.
Weigh up the above, check the rates below and in our best buy tables, have a scout around what the best deals look like – and speak to a good independent broker.
There are a couple of things to look out for if you do decide to fix.
You need to check the bumper arrangement fees are worth paying – if you don’t have a big mortgage you may be better off with a slightly higher rate and lower fee.
It’s wise to also think carefully about whether you expect to move home soon. A good five-year fix should be portable, so you can take it with you.
But your new property will need to be assessed and you might need to borrow extra money, and so your lender could still say no. Getting out of a fix typically requires a hefty hit to the pocket from early repayment charges.
Today’s low rates may stick around, they may even inch a little lower, but they may also be swiftly axed.
If you think you’d kick yourself if you miss out on one, then set aside some time to consider what to do.

Fix vs tracker: where are the best rates?
Borrowers should have a quick look at the rates below, these are regularly updated by This is Money’s mortgage team. If you spot a deal you think has been pulled or should be in there, email us via editor@thisismoney.co.uk with mortgage rates in the subject field.
For a full rate check use This is Money’s mortgage finder service and best buy tables, these are supplied by our independent broker partner London & Country.
When dealing with any broker, remember some lenders will not usually be included as they do not pay commission, some of these such as HSBC and First Direct consistently offer top rates, so check their deals.
Fixed-rate deals
Bigger deposits (40/35 per cent deposit)
Five-year fixes
HSBC has a 1.99 per cent deal with a £1,672 fee for borrowers with a 35 per cent deposit or equity stake.
Post Office Money has a 2.12 per cent rate with a £1,265 fee for borrowers with a 40 per cent deposit or equity stake.
Skipton Building Society has a 2.12 per cent rate with a £1,995 fee for borrowers with a 40 per cent deposit or equity stake.
Two-year fixes
HSBC has a 0.99 per cent rate with a £1,672 fee for borrowers with a 35 per cent deposit or equity stake.
Chelsea Building Society has a 1.15 per cent deal with £1,480 fee for borrowers with a 35 per cent deposit.
Mid-range deposits (25 per cent deposit)
Five-year fixes
Yorkshire Building Society has a 2.22 per cent rate with a £1,180 fee.
Source: Dailymail.com
Post Office Money has a 2.23 per cent rate with a fee of £1,765.
HSBC has a 2.24 per cent rate with a £1,672 fee.
Two-year fixes
Yorkshire Building Society has a 1.32 per cent deal with a £1,680 fee.
Post Office Money has a 1.33 per cent deal with a £2,265 fee.
Chelsea Building Society has a 1.34 per cent rate that comes with a £1,880 fee.
20 per cent deposits
Five-year fixes
Post Office Money has a 2.43 per cent deal with a £1,765 fee.
Platform has a 2.44 per cent deal with a £1,339 fee.
Two-year fixes
HSBC has a 1.48 per cent deal with a £1,672 fee.
Co-op Bank has a 1.49 per cent rate with a £1,499 fee. Smaller deposits (15 per cent deposit)
Five-year fixes
HSBC has a 2.58 per cent rate with a £1,672 fee.
Accord Mortgages has a deal at 2.59 per cent with a £1,180 fee.
Tesco Bank has a 2.64 per cent rate that comes with a £995 fee.
Source:Dailymail.com
Chelsea Building Society has a 1.58 per

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