Rates set to rise?

Buy-to-let mortgage rates are likely to edge upwards later in 2017 and into next year - even if the Bank of England keeps Britain's base rate on hold, brokers have warned.

The Bank's monetary policy committee voted by a majority of eight to one to maintain the Bank Rate at 0.25% yet again, marking eight years exactly since rates fell to too their previous record low of 0.5%. But because most banks and building societies price their mortgages based on their 'cost of funds', mortgage rates are not directly linked to the current base rate in the majority of cases.

Over the past two weeks these funding costs have been rising, and with the US Federal Reserve hiking rates by 0.25%, there are fears they will continue to drift upwards. The cost of a mortgage depends largely on a mixture of the rates paid by the lender on savings to retail depositors, the returns demanded on private money and so-called 'swap rates'. Pricing can also be linked to competition - in order to win more business, a lender may be prepared to make less money on each loan, keeping mortgage rates lower.

A big influence, however, is swap rates. These determine the rate of interest that lenders pay to access money from other investors - and they have been rising for the past two weeks as markets anticipated yesterday's decision from the Fed.

The promise of a steady base rate may not keep mortgage lenders pricing low however. Higher swap rates will have an effect on pricing but any cost increase passed on by lenders is likely to be subdued by competition and the oversupply of money. In other words, lenders are keen to lend and want to attract business so to do this they will need to remain competitive on mortgage pricing.

Keeping all this in mind if you are a landlord and have not reviewed your current mortgage recently now could be a good time to do so.

If you are looking for a new or re-mortgage, please do make contact and one of our qualified advisers will be happy to help.