Average five-year fixed rates went above 6% this week. Mortgage Strategy asks how much higher might they go?

ONP group partnership director Mark Tosetti

“With mortgage rates now climbing above 6%, five-year fixes are at their highest since the mini-budget, begging the question – where is the ceiling in this ‘new normal’?

“Until the Bank of England can harness the bank rate, which is likely to rise by at least another 0.25 per cent in August, the cost of borrowing will continue to rise causing further pain to borrowers – especially the 400,000 expected to come off their fixed terms between July and September.

“We need to see a level of certainty return for the cost of borrowing to rally swap rates. This would then lead to an increased availability of mortgage products that would better meet the immediate needs of consumers.”

Access Financial Services chief executive Karl Wilkinson.

“I think that the Bank of England base rate may have at least couple of rises to go yet, with inflation remaining stubbornly high.  The money markets are already pricing these rate rises into SWAP rates however, which will be why we have already seen the escalation of fixed rates.  That said, I think that we could see fixed rates rise by up to another whole percentage point yet before we hopefully see them easing back again.”

Landbay business development director Rob Stanton

 “Volatility in swap rates and the wider market is difficult for borrowers, brokers and lenders alike. Until we see inflation in a clear downward direction, swap rates are likely to remain volatile. To date inflation has proved stubborn and so the outlook for where base rate may peak is higher than it was a few months ago.

“Nonetheless our recent survey showed that fixed-rate mortgages remain the product of choice for the majority of landlords, with 40% set to choose five-year fixes when they next remortgage”.

West One managing director Andrew Ferguson

“There continues to be volatility in shorter term interest rate projections with terminal value of base rate increasing towards 6.5% from 4.5% at the end of 2022.

Five-year interest rates have been less impacted than two-year rates but the market is now assuming that rates go higher and stay higher for longer due to stubborn inflation.  It is the combination of both that has impacted product offerings.  There is potential for rates to go further in the event that inflation is not curtailed”.

Coventry BS head of intermediary relationships Jonathan Stinton

“The only prediction we can make about rates at the moment is they will continue to be unpredictable. Swap rates are still volatile, and a lot of what happens will hinge on inflation and the next base rate meeting.”