Ten-year fixed rate mortgages set to rise

Ten-year fixed-rate mortgages could be set to rise following signals from the Bank of England’s Monetary Policy Committee that the base rate could cl

Ten-year fixed-rate mortgages could be set to rise following signals from the Bank of England’s Monetary Policy Committee that the base rate could climb.

On the day TSB announced it had pulled ten-year fixed rate deals (5 July), brokers indicated the era of falling rates could be nearing its end – and longer-term fixes would be the first to rise.

TSB stated its three-year fixed rate house purchase and ten-year fixed rate house purchase and remortgage products had been withdrawn for a short period in order to maintain customer service levels ahead of the launch of a new banking platform.

A spokesperson said: “In order to do this, we intend to slow down our mortgage lending over the coming months. However, we expect to reverse this slowdown as we reach the end of 2017 and move into 2018.”

But Ray Boulger, senior technical manager at John Charcol, said: “I think that is reasonable in so far as it goes. Whenever a lender is planning a major IT change, it makes sense from their perspective to minimise the amount of outstanding business.

“But I suspect it is not quite as simple as that. Ten-year gilt yields have moved up by 25 to 30 basis points over the last week to ten days. I would not be surprised to see some other fixed rates being pushed up over the next couple of weeks to reflect this.

“It started after the comment from more than one Monetary Policy Committee member changed perceptions about when we might get the next bank rate rise. The longer-term rates tend to be more affected.”

David Hollingworth, associate director, communications at London and Country, said the lender’s announcement should be taken at face value – but that rates could nevertheless be set to climb.

“You can’t rule out the potential for fixed rates to start to creep up,” he said. “Swap rates have increased in the last week or so, and that could start to feed through to mortgage rates.

“There could be a period where what we have become used to is rates just falling, and that may not be the case.”

He added that the more talk there is about the potential for rate rises, the more likely it is that people who have yet to remortgage will begin to consider their options.

“The rates on offer give them the ability to potentially save money now and protect against rises to come.”

TSB’s 10-year fixes were some of the lowest on the market, with rates starting from just 2.49 per cent.

The lender has also cut the interest rate on a five-year fixed rate for residential remortgage borrowers by 0.1 percentage points.

Available at 60-75 per cent LTV, the product’s rate is now 1.79 per cent with a £995 fee.

simon.allin@ft.com

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