Interest rate uncertainty
Given the unprecedented political uncertainty around Brexit, and hence the many possible changes to much of the UK’s markets it is increasingly difficult to predict what will happen over the next year.
Mark Carney, the Governor of the Bank of England has indicated that the base rate will continue to increase the base rate over the next year, as agreed by the Monetary Policy Committee. This means the base rate is likely to increase to 0.75%.
However, he as also suggested that if the exit from Brexit was disorderly he would be prepared to decrease the base rate in order to protect the economy.
According to the chief executive of mortgage broker SPF Private Clients, Mark Harris: “It looks set to be an intriguing year. We expect interest rates to end the year around 1% and mortgage rates will reflect this.”
However in line with Mark Carney he also foresees a drop in rates if the UK crashes out of the European Union on unfavourable terms.
Other experts have differing views however, for example the senior mortgage manager at John Charcol says: “I think the most likely scenario is Bank Rate remaining at 0.75% for most of next year, with the possibility of a small fall back to 0.5% if there is more uncertainty than we currently expect.”
And to further add to the mix the majority of mortgage owners themselves seem to be planning for a future rise, with David Hollingworth, of L&C Mortgages saying fixed rate deals account for 90% of the group’s current business.
Even so, Hollingworth concedes: “For a mortgage borrower, trying to second guess at the moment is even harder than normal.”
A good piece of news that came out of 2018 was the competitiveness of UK mortgage companies, and this seems set to continue into 2019. This means that savvy borrowers may be able to shop around for good rates.
Hollingworth says: “This year has been very, very competitive with mortgage lenders pushing hard to attract borrowers.
“I don’t see a reason why that would change in the new year and it might just be a tighter market with even more intense competition.”
And with even more lenders coming to the market the profit margins that are being made on the loans will continued to be squeezed, and even more so as existing lenders try to get more of the market share.
This competition is not only materialising in decreased rates but also in the many incentives that lenders offer attached to their products. The past year has seen not only cashback and reduced fees but also zero cost valuations and fee free legals being brought to the table.
In fact there are more than 2.5 times more mortgages offering cashback than were available in 2011, currently standing at 1,459. The main focus looks to be remortgages however as transactions in the property market, especially the capital are predicted to be slow.