We can all rest easy as Mark Carney, Governor of the Bank of England, is keeping a watchful eye on the housing market and proactively ensuring it is not overheating. He’s doing this by diverting cheap money away from individual mortgages into businesses from January, via the Funding for Lending Scheme (FLS). This is good news because it means money is going where it is needed most and ensures we have more measured growth in the housing market.
Speculation abounds that this might mean more expensive mortgages. But will it?
As far as the Bank of England is concerned, there are many more pieces to the jigsaw than the housing market. There is the state of the economy, which is showing signs of growth but is still relatively fragile. There is unemployment, which has a long way to go to get anywhere near the 7 per cent threshold for it to be considered under control. There is also the level of indebtedness for many UK households. Mr Carney will not want to push up interest rates, exacerbating personal debt, when many are struggling with household bills. He will want a strong sign that debt is manageable before this happens.
Mortgage lenders have to plan ahead and many still have FLS money in their coffers and the ability to draw down more before 2014. So this means there will still be cheaper money available, well into 2014. This suggests mortgage rates will not shoot up overnight.
However, longer-term Swap rates are trending upwards. This is one of a number of sources of funds for lenders when pricing longer term fixed-rate mortgages. This could mean rates could go up on longer fixes in 2014.
There is no need to panic but it is important to look at your situation to ensure you have the right mortgage for your circumstances. It might be worth considering a longer fix to help with budgeting, and there are some excellent deals available, with five-year fixes starting at 2.89 per cent. Contact us for more details.