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Governor confirms interest rate hike

by Mike Abbott | Jun 13, 2014
  • It's been a watershed day in the markets with comments from Mark Carney, the Governor of the Bank of England, confirming that interest rises are around the corner.
    mortgages interest rate hike

    In his most hawkish comments to date, Carney said: “There's already great speculation about the exact timing of the first rate hike and this decision is becoming more balanced. It could happen sooner than markets currently expect.”

    We’ve had the view for the last 18 months that rates would most likely begin to rise towards the end of 2014. It seems like it might even happen before then. 

    How does this affect your mortgage? 

    Mortgage rates always follow capital market rates with a lag of about two weeks. Since the beginning of the year, we’ve seen five-year fixed rates creeping up; they are 0.35% more expensive to date this year. Despite this creep, we still see five-year fixed rates being 0.2% below fair value against the UK yield curve. 

    With today’s steepening of the yield curve we should expect to see two, three and five-year fixed rates rising quite steeply now. For those who still have mortgages on variable rate mortgages, there is a limited time window to move to a fixed rate before the yield curve is priced in. Beyond that, further forward guidance from Carney confirming the degree of rate rises expected will affect the mortgage market pricing. 

    Free valuation and free legals: 

    It’s worth remembering that remortgage deals offer a free valuaton and a free conveyancing service. Therefore, the switch from one lender to another is a ‘fee neutral’ process with the costs of staying with your current lender being matched by those of moving to a new lender. Lenders always price remortgage deals to new customers more favourably than those to existing customers, and these two facts create the churn we see in the UK market. 

    Our advice to clients is to embrace the structure of the market and manage your mortgage debt proactively to ensure you’re always on the best rate possible for your circumstances. 

    We are recognised as one of the leading foreign national and contractor mortgage specialists in London. To contact one of our mortgage advisers, give us a call on +44 (0) 20 7759 7519 or email

    We are a professional services company that specialises in cross-border financial and immigration advice and solutions.

    Our teams in the UK, South Africa and Australia can ensure that when you decide to move overseas, invest offshore or expand your business internationally, you’ll do so with the backing of experienced local experts.

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