Long Term Fixed Rates Look Set To Increase

Longer-term fixed rates look set to increase because 10-year gilt yields have risen from a low of 0.527 per cent in August to 0.98 per cent at the end of last week.

The past few weeks has seen lenders continuing to cut prices on some of their fixed-rate deals. However, with swap rates edging up and the markets already pricing in any further potential cuts to the Bank of England base rate, brokers believe fixed-rate deals have reached the bottom.

“Longer-term fixed rates are likely to start creeping up as 10-year gilts moved sharply following Prime Minister Theresa May’s comments suggesting the Bank of England should rein in quantitative easing. A 0.15 per cent cut to base rate has already been priced in to the market.”

Speaking at the Conservative Party conference, May criticised the Bank of England’s policy of low interest rates and money printing, saying it had benefited only the wealthy. She said: “People with assets have got richer. People without them have suffered. People with mortgages have found their debts cheaper. People with savings have found themselves poorer.  A change has got to come. And we are going to deliver it.”

The prime minister’s criticism was unusual given the independent status of the BoE but Downing Street denied it was an attempt to influence monetary policy.

Ipswich Building Society chief executive Paul Winter says lenders will not fully reflect any further base rate cut because it will be “unaffordable for them”.

He adds that building societies in particular would be loath to cut interest rates any further because savers, who are already suffering, would earn even less on their money.