The cost of mortgages may soon rise due to the falling pound and a fall in the value of guilts. These effect “swap rates” which effect price the capital banks can obtain in the market.Swap rates have risen to 0.58% from an all-time low of 0.38%. However, as a result of these increases, current affordability would increase to 25% of an average first time buyer’s income.This is the same level as 2007 which would imply the borrower would no be too stretched.
Key Takeaways:
- “Swap rate” cost to banks of borrowing money has been rising since summer
- Cost has not yet been passed along to mortgage customers, but this is likely soon
- Banks may be prepared to allow longer mortgage terms to keep borrowing affordable
“Loan terms are already getting longer, as the graph below shows. But in Britain mortgage terms remain very short compared with, say, some Scandinavian countries.”