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Advisers urged to fix borrowers now

Advisers are being urged to move borrowers over to fixed rate mortgages now before rates move up.

John Charcol senior technical manager Ray Boulger predicts that sharp rises in swap rates will lead to several lenders to increase the cost of some fixed rate mortgages over the next few days.

He says: “The message for borrowers wanting to take a fixed rate is clear; get in now or miss out on the current relatively low rates.”

Boulger warns that the current UK gilt yield increases are mirroring recent US yield hikes, which led to a sharp increase in their fixed rates. He says: “Gilt yields and swap rates reached their recent lows on May 14, but in just 3 and a half weeks the 3 and 5 year swap rates have surged by a massive 0.62 per cent.

“This situation has some parallels with the US. The yield on the US benchmark 10 year Treasury Bond bottomed out on January 15, but less than four months later closed a whopping 3.88 per cent. As a consequence rates on a US 30-year fixed rate mortgage have risen by 0.45 per cent in the last month alone to around 5.45 per cent.”

Boulger says the Government’s quantitative easing should be reducing rates rather than allowing them to rise. He says: “The Government is impotent in this area and has lost control of interest rates except at the very short term end.”

Email Mortgages managing director Michael White is also warning advisers to get their clients fixed now. He says: “We can appreciate that some borrowers will feel pleased with their current mortgage arrangement particularly if they are on a standard variable rate of between 2.5 to 3.5 per cent. However, what might seem a ‘no brainer’ at present needs to be looked at in closer detail.

“Those who are contemplating remortgaging to a fixed rate should certainly consider their options right now. To hang on, even for a couple of months, could mean a further 30 to 40 basis points rise in pricing which over the course of the mortgage will add a significant amount to the overall payment.”

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