For the past month or so, it has looked like mortgage rates are on the slide – but it looks like that could soon change.
After spiking in February when the Iran war sent oil prices and inflation forecasts hurtling upwards, rates have been on steady descent towards 4 per cent.
Over the past few days, however, the situation in the Middle East has deteriorated – again.
On Monday, President Donald Trump said the US was restarting a blockade of Iranian ports and would impose a 20 per cent charge on cargo shipped through the Strait of Hormuz – with a night of strikes between the US and Iran following.
In response, oil prices have risen again with Brent crude up more than 3 per cent.
Back in the UK, this has sent swap rates – which banks use to price their fixed-rate mortgage – upwards.
A sustained rise would likely mean that some of the recent cuts to home loan rates – which has seen some deals below 4.2 per cent appear in recent days – reverse.
Although not a certainty – the US and Iran could re-agree a ceasefire, oil prices might drop and rates may continue their descent – to a degree, that doesn’t change the big picture.
In the new normal, mortgage rates are not safe.
They have always been somewhat unpredictable. Surprise events like Russia’s invasion of Ukraine and the cost of living crisis can push rates up, while a struggling economy can drag them down.
But today’s situation feels different.
Mortgage rates feel more precarious than they have done in recent years – and that seems set to stay.
This is because they are essentially at the whims of two warring factions that are relatively unpredictable.
The sudden decisions of one party can change rates in an instant, even if they looked to be on an entirely different path hours or days before.
So, what does this mean for you? You need to start planning earlier.
If your mortgage deal is expiring, you can lock in a new date three to six months before it does, and if rates later drop you can switch to a cheaper one. If they rise, you’re protected.
Mortgage brokers have being saying that this is the best course of action for years – but now it’s so much more crucial.
If you’re within the window when you can take action but leave it a week more, you could end up paying hundreds or thousands of pounds a year extra.
Those who prepare will be rewarded.
Although you can’t do anything to combat the volatile economic climate that we live in, you can act to put yourself in the best position possible to tackle it.
So, if your fix is ending later this year, do your future self a favour, and start thinking about what you’ll do today, rather than tomorrow.
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