Brokers believe the ending of the Bank of England’s Funding for Lending Scheme for mortgages will not lead to steep increases in mortgage rates.
Despite the announcement by Bank governor Mark Carney that the FLS scheme will focus on lending to small and medium-sized businesses from 31 January, brokers believe any impact on rates will be minimal.
Trinity Financial product and communications manager Aaron Strutt says: “We could see rates rising slightly over the coming months simply because the cost of funds will be higher. But there is also a need for the major lenders to stay competitive, which is likely to help keep rates down.”
London & Country associate director of communications David Hollingworth says: “We could very well see a slight rise in mortgage rates as the cost of funding creeps up but I would be surprised to see any steep jumps given the need to stay competitive.”
John Charcol senior technical manager Ray Boulger says: “Banks will have drawn down as much as necessary in the final months of the scheme while they could, so the funding will be there to facilitate lending at current prices. More significant is the change in gilt yields and swap rates, which have been slowly edging up in the past 12 months and have not yet been reflected in prices.
“If the rise continues, one would have to expect the cost of mortgages to rise eventually.”