Transactions on the rise as mortgage rates fall?

As long as they have a sizeable deposit at hand, home-buyers could get a mortgage rate of just 1.19%, as interest rates hit new lows.

It seems that lenders are stumbling over one another to get a consumer’s attention through offering increasingly low interest rates. According to research undertaken by This is Money, there are 25 loans available with interest rates of less than 1.5%. The best offers appear to be reserved for two-year fixed rate mortgages. However, across the board it appears that rates have fallen. Five year fixed rate mortgages have fallen since autumn, and variable rate deals have also decreased. Those with smaller deposits also look to benefit, as figures from the Bank of England illustrate that between October and January, a five year fixed-rate deal at 95% has fallen by a half a percentage point.

It’s claimed that these are the best mortgage prices in a generation, and consequently any practicing solicitor or conveyancer may hopefully notice a rise in transaction levels in the coming months, as consumers look to take advantage.

It appears these low rates are likely to continue. The Council of Mortgage Lenders (CML) recently concluded on this data: “Obviously, there may be some bumps in the road, and market volatility could affect funding rates. There remain some large geo-political risks both in Europe and further afield. However, if these bumps can be successfully negotiated, the outlook will be for low mortgage rates to continue.”

Others have estimated that if the price war between lenders continues to escalate, then in the next six months’ fixed rate deals of less than 1% could be offered. The CML states these low rates can be attributed to banks and building societies benefiting from inflows of cash from savers, and the availability of capital through wholesale funding.

However, it must be remembered that the best time to take out a mortgage might not necessarily equate the best time to buy a house. House prices still lean towards the opposite end of the affordability spectrum. Certainly it may be the best time to remortgage, but it would be misleading to state that record low interest rates equal the best time to buy a house. Yet, somewhat inevitably, a handful of consumers may fail to spot this and will simply jump at the chance to purchase a house with a historically low mortgage rate at their fingertips. Subsequently, as rates look set to decrease even further in the next 6 months, transaction levels could grow as a direct consequence.

Today's Conveyancer