Mortgage rates expected to fall

Ryan Bembridge

July 4, 2016

andrew montlake

Mortgage rates are likely to fall as the Bank of England considers cutting the base rate from 0.5%, Coreco director Andrew Montlake has predicted.

However Montlake urged landlords considering buying to price in the tax changes between 2017 and 2020 – when higher rate taxpayers will have to cope with a gradual reduction in mortgage tax relief from 45% to 20%.

He said: “We could well see rates from some lenders fall over the next couple of weeks as they look to show that it is business as usual after the Brexit vote.

Consumer confidence still lower than before Brexit

“The real question however, is how long lenders will be able to sustain these low rates especially within an uncertain environment, so it makes sense for borrowers to review their options and take advice at the earliest opportunity.

“Given the tax changes that are coming in over the next few years, lenders have begun to increase their rental stress test requirements, which means that landlords will find they cannot borrow quite as much as they could have previously.

“Many landlords are continuing to invest without too much concern, especially post-Referendum when they feel there could be some buying opportunity. However, all landlords should be reviewing their portfolio now to ensure it is structured correctly and they do not get any nasty shocks in the next few years.”

Property expert Faulkner echoed Montlake. She said: “Mortgage rates are, at the moment, expected to fall.

“They were certainly doing that prior to the credit crunch with HSBC coming out with a 0.99% mortgage which was fixed for two years for those buying and remortgaging up to a 65% loan-to-value.”

While Bank of England Governor Mark Carney has hinted that a rate cut is likely in the summer not everyone is convinced.

Tony Ward, chief executive of Clayon Euro Risk, said: “I expect the Bank to hold the base rate to give them room to manoeuvre.”