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Oil slide leads to fears over rising mortgage rates

A recent slump in oil prices has caused fears that mortgage prices could be sent soaring 30 to 40 basis points.

The price of Brent crude oil has more than halved in the past six months from $111.90 per barrel in June 2014 to roughly $47 per barrel today.

Precise Mortgages managing director Alan Cleary warns ensuing swaps rate fluctuations could cause fixed rates to rise.

He says: “I could easily foresee a situation where ultra-low petrol prices may make us smile at the pumps but hit swap rates hard, forcing up the cost of fixed-rate products by 30 to 40 basis points.”

GPS Economics director Gary Styles says: “The recent oil market slide could well lead to heightened volatility, for a variety of reasons.

“The market will expect a reversal in oil prices – I don’t think many believe it will stay below $50 per barrel. That expectation creates volatility and swaps rates could suffer as a result.

“Secondly, increasing instability in Russia will have a volatile effect on rates too so if market conditions do persist, we could well see mortgage rates jump as a result. There are positive effects of falling oil prices too, but this is one area it could impact negatively.”


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