Brokers are warning a year-long trend of falling mortgage rates could be coming to an end after a recent surge in swap rates.
Swap rates, which lenders use to hedge potential interest rate increases and are closely linked to mortgage pricing, have crept up since May but surged at the back end of last week after the US Federal Reserve hinted it could wind up its programme of quantitative easing.
On 17 June, two and five-year swaps were 0.75 per cent and 1.34 per cent respectively.
However by Thursday 20 June, the day after Fed chairman Ben Bernanke said the US could end the programme by the middle of next year, two-year swaps hit 0.84 per cent and five-year swaps hit 1.59 per cent.
On Monday, both two and five-year swaps shot up again, to 1.01 per cent and 1.85 per cent respectively.
John Charcol senior technical manager Ray Boulger says: “The rational for waiting a bit longer to see if rates come down any further has completely disappeared and the potential for any further cuts is negligible, while the potential for rates to go up is substantial.”
London & Country associate director of communications David Hollingworth says: “Whether it will be a trend of increasing rates across the board or just arresting the trend of cuts is not clear yet, but I think we will definitely see more rates increasing.”