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Will mortgage rates rise in 2017?

After HSBC pulled the lowest fixed rate the market has ever seen, could the only way for mortgages rates be up? If so, should you fix a rate now?


With the cheapest ever fixed rate on the market disappearing, the new year could see mortgage rates finally rise after years of steadily falling rates.

Last week, HSBC called an end to its 0.99% two year fixed rate deal and increased rates on other products, with their new mortgage offers up to 0.5% higher.

HSBC introduced the lowest ever fixed rate deal in June 2016, but recent rises to their costs have forced them to pull the offer.

Could it be time to fix your mortgage rate?

Enjoy fixed monthly mortgage costs for a set period, whatever happens in the financial markets

Compare fixed mortgages

What next for mortgage deals?

Whilst headline grabbing, HSBC’s 0.99% deal was only available to borrowers with at least a 40% deposit and the arrangement fees were a reasonably hefty £1499. So while it was the lowest ever fixed rate deal, it may not have been for everyone.

The question remains whether other lenders will follow HSBC in early 2017 and hike up their prices too.

But for now, the current lowest fixed rate is at a two year deal of 1.09% from First Direct.

And average mortgage rates would appear to still be at all time lows, especially when compared to their pre 2008 financial crash levels.

average mortgage rates 2016

Mortgage costs on the rise

Commenting on their rate changes, HSBC said:

“When the cost of funding comes down we are always quick to pass on the benefit to customers, and we have been able to do that for almost six months with our 0.99% rate mortgage. The cost of funding has gone up over the last month or so and we have had to reflect that in our recent pricing review.

“We regularly review our rates, and while they still provide good value for those looking to move on to or up the housing ladder, should the cost of funding come back down you can be sure we will reflect that with some great deals.”

Swap rate shoots up

The swap rate (the price big retail banks buy and sell money to each other for) shot up after Donald Trump’s election victory (also in response to other perceived risks in the global economy) and have remained at higher levels.

This in turn will have pushed up lender’s costs and as HSBC mentioned above, it’s likely this cost will be passed on to borrowers.

Bank of England keep base rate at all time low

Despite other costs increasing, one of the biggest costs affecting mortgages, the base rate of interest, remains at an unprecedented low.

In their last meeting of 2016, the Monetary Policy Committee (MPC) of the Bank of England (BoE) discussed the base rate of interest Thursday 15 December, and decided to keep it at the all time low of 0.25%.

Mark Carney, Governor of the BoE, has come under fire for taking the base rate to 0.25% from an already historic low of 0.5% in August 2016 in the wake of the Brexit referendum. Critics believe he cut rates too early after the economy reported stronger than expected figures for the final quarter of the year.

Despite this, the Bank of England remain firms in its predictions that higher inflation and slower wage growth will squeeze household budgets and spending next year. Meaning the base rate is unlikely to go up any time soon.

Should you fix a rate now?

It’s looking unlikely that rates will fall much further, so it could be worth fixing your mortgage rate now.

See what a rate rise could do to monthly repayments on a £100,000 mortgage below.


But bear in mind, barring any dramatic economic shocks, it’s unlikely mortgage rates will dramatically shoot up overnight. So don’t rush into fixing a rate without fully considering your options and the full costs of remortgaging.

Read more…

  • Is it worth remortgaging? – Remortgaging can be an effective way to save money on your monthly mortgage repayments, but it can be hard to work out whether or not it is actually worth it in the long run.
  • When to fix a mortgage rate? – Fixed mortgage rates are getting increasingly competitive with rates at all time lows, but deciding on the right time to fix is difficult.
  • What does the base rate cut mean for your finances? – The Bank of England cut the base rate of interest to 0.25% in August 2016, this new all-time low could spell cheaper mortgage payments but worse returns on savings.

Could it be time to fix your mortgage rate?

Enjoy fixed monthly mortgage costs for a set period, whatever happens in the financial markets

Compare fixed mortgages