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Mortgage boom helps drive northern powerhouse

The mortgage market is booming in the North of England with the number of first-time buyers soaring to a pre-financial crisis high.

Figures released today by UK Finance revealed, in 2018, the mortgage industry helped nearly 85,000 households buy their first home in the region – which is made up of the North West, North East and Yorkshire and Humber.

This is an increase of 3% on the previous year and is the highest level since 2006, according to UK Finance which is publishing the data to coincide with its ‘Northern Powerhouse’ dinner to discuss how financial services can support the region’s economy.

These strong figures, it suggested, were down better affordability in regions of the North, where the average deposits and income multiples were lower than anywhere else in England. It said there was an increase of 1.1% in the number of home movers.

Buy-to-let hotspots

It wasn’t just residential mortgages which were helping to drive the boom. Newcastle, Liverpool and Hull bucked the national trend and experienced strong growth in buy-to-let lending, UK Finance revealed.

It said this had been driven by lower house prices and a healthy labour market as well as strong rental demand. This allowed landlords to achieve higher yields than the UK average.

The growth in Hull was particularly strong – with buy-to-let lending soaring by 12.8%.

Jackie Bennett, director of mortgages at UK Finance, said: “These figures show the North of England has a strong and dynamic mortgage market, with lenders helping thousands of first-time buyers onto the housing ladder.

“This has been combined with a steady increase in home movers, making it easier for buyers to find a property that suits their needs.

She added: “The mortgage industry stands ready to work with the UK government and local authorities to capitalise on these strengths and help deliver on the full economic potential of the Northern Powerhouse.”

Strong regional disparities

While the figures were good news for the North of England, they also exposed weaknesses in other parts of the UK, particularly in London.

Shaun Church, director of Private Finance, said they highlighted the strong regional disparities in both housing demand and activity.

“Comparatively low property prices and strong rental demand makes the North an attractive prospect for landlords,” he said.

“After years of being slammed by regulatory changes making it harder to turn a profit, investment location has never been more important. Northern regions are still enjoying decent house price growth, meaning landlords can also enjoy an increase in the value of their asset.”

By Kate Saines

Source: Mortgage Finance Gazette

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UK mortgage lending perks up in Brexit lull, consumer credit softer

Britain’s housing market appeared to benefit from a brief lull in Brexit worries last month, Bank of England data showed on Monday, but consumer lending growth was the weakest in over five years, adding to the mixed signals coming from the economy.

Uncertainty about Brexit has weighed on house prices, especially in London and southeastern England, since voters decided in June 2016 to leave the European Union.

But there have been signs of a stabilization coinciding with the decision to extend the original March 29 deadline for Britain’s EU departure until the end of October, and the closely watched RICS poll of surveyors has recovered in recent months.

The BoE said the number of mortgages approved for house purchase rose to 66,440 in June from 65,647 in May.

That was the highest since January and above the average forecast from economists in a Reuters poll.

Net mortgage lending, which typically lags behind approvals, also rose more than expected, up by 3.7 billion pounds ($4.6 billion) in June.

“June’s mortgage data ties in with the view that housing market activity has got some help from the avoidance of a disruptive Brexit at the end of March,” Howard Archer, economist at EY ITEM Club, said.

Faster wage growth and a jobs boom are also supporting house prices but Archer said he expected them to rise by no more than 1.5% this year, roughly their current growth rate.

If Britain leaves the EU without a deal on Oct. 31 – something Prime Minister Boris Johnson says his government is actively preparing for – then house prices could quickly fall by around 5%, Archer added.

Last week industry body UK Finance reported the number of approvals for house purchase near a two-year high in June, while its measure of consumer lending growth picked up slightly.

The BoE said net lending to consumers in June alone rose by 1.046 billion pounds, again faster than forecast and stronger than in recent months.

However, it is lower than the average monthly increase of around 1.5 billion pounds chalked up in the 12 months to June 2018 and the annual rate of lending growth slowed to 5.5% from May’s 5.7%, the weakest since April 2014.

British consumer spending has been a driving force of growth since the Brexit referendum, helping to offset a drying up of business investment. But in recent months it has lost momentum.

The slowdown partly reflects strong spending a year ago, boosted by major sporting events, such as the men’s soccer World Cup, and better weather.

By contrast, business lending rose by 2.6 billion pounds in June – above its post-referendum average – to give an annual growth rate of 4.4%, the highest since the series started in 2012.

“Firms haven’t suddenly adopted a defensive mindset, despite the risk of a no-deal Brexit,” Samuel Tombs, an economist at Pantheon Macroeconomics, said.

Increased borrowing was concentrated in larger firms, however, and borrowing by small businesses was almost flat.

A separate survey by Bibby Financial Services, which offers trade finance, reported that half of small businesses feared a recession this year and 44% were struggling with cashflow, in part due to pre-Brexit stockpiling of raw materials.

Reporting by David Milliken; Editing by Raissa Kasolowsky

Source: UK Reuters

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Government urged to hold off on further buy-to-let interventions

The Government is being urged to hold a moratorium on further buy-to-let interventions after analysis found the market has swung in favour of large institutional landlords.

Research by the Intermediary Mortgage Lenders Association (IMLA) – based on the Government’s 2018 English Private Landlord Survey – warned that further changes could affect rental supply and mean higher rents for tenants.

IMLA’s analysis found professional landlords, as of the end of 2018, represent 48% of the private rental sector, up from 38% in 2010.

In contrast, the number of single-property landlords has fallen from 40% to 21% over the same period.

This was blamed on a tougher mortgage market, the increasing size of the build-to-rent sector and mainly, IMLA claims, due to Government changes such as additional Stamp Duty and the scaling back of mortgage interest relief making buy-to-let less profitable.

Kate Davies, executive director of IMLA, said: “We are concerned that layers of Government intervention have adversely affected small-scale landlords’ ability and appetite to invest in properties over recent years.

“As increased tax and regulatory responsibilities increasingly disincentivise landlords, we face a possible topping out of the private rental sector (PRS).

“While it’s good to see professional and institutional investors increasing their stake in the nation’s housing stock, the number of one-property buy-to-let investors has fallen by almost half.

“Squeezing the PRS puts the pressure on millions of renters in Britain. We are strong advocates of a fair market with a quality supply of homes. Restricting the PRS risks a lack of supply, rising rents and a fall in the quality of rental accommodation.

“We have repeatedly called for Government to put the brakes on regulating and taxing our nation’s landlords. We urge a more moderate approach to ensure our private rental sector remains strong for the millions of renters who rely on it.”

By MARC SHOFFMAN

Source: Property Industry Eye

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Mortgage approvals down slightly in May

Mortgage approvals for house purchases, an indicator of future lending, fell back slightly from April to 65,400 in May, the Bank of England’s Money and Credit statistics has found.

Approvals remained broadly in line with the narrow range seen in previous years.

Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “The number of mortgage approvals for house purchase, which indicate at what level future lending will be, fell back slightly in May but remain broadly in line with the narrow range seen in previous years.

“It shows that the mortgage market is trundling along quite steadily with no great shocks either way. This is reassuring as there is plenty of political and economic uncertainty, which is preying on people’s minds and creating a delay when it comes to making big decisions

“Lenders remain keen to lend and several have cut rates in recent weeks, so mortgage rates are likely to remain low for a while yet, further supporting the market.”

Net mortgage borrowing by households fell to £3.1bn in May, the smallest increase since April 2017. However, the annual growth rate for mortgage lending remained stable at 3.2%, and has now been around 3% since late 2016.

John Phillips, operations director at Just Mortgages and Spicerhaart, added: “There is not a huge change here; net mortgage borrowing fell slightly, but the annual growth rate for mortgages has remained stable at 3.2%, which means it has now been steady at around 3% for almost three years.

“Approvals, however, were down for both house purchase and remortgaging, which could suggest that lending will fall over the next few months and growth may slow too.

“There is no doubt that it has been a funny old few years for the mortgage market. Brexit has obviously had – and is still having – an impact, but I don’t think it is the only factor at play.

“For many years now, borrowing costs have been very low, but wages have not been keeping pace with house prices, so while mortgages are affordable, deposits and stamp duty are not.

“Those who may have upsized in the past are now either remortgaging to borrow more and then extending, or just saving the money they would’ve used on stamp duty and investing it into their existing homes.”

Phillips said that if the government wants to get things moving again, it needs to do something about the cost of moving, in particular stamp duty.

He said: “People are simply not prepared to throw thousands of pounds that could be used to invest in a bigger home on stamp duty.

“Back in April, the House of Lords Committee on Intergenerational Fairness and Provision recommended changes to stamp duty because, they said it is ‘seriously distorting the market’ and I think they’re right. Until something is done about the crippling cost of stamp duty, the market will continue to struggle.”

The number of approvals for remortgaging fell in May, to 46,700.

Nick Chadbourne, chief executive of conveyancing solutions provider LMS, added: “Remortgage activity figures from the Bank of England show the market is resilient, buoyed by near record low interest rates and high product expiry rates in Q2 this year.”

“In fact, LMS’ latest remortgage snapshot shows that there was a spike in remortgage activity to 53,624 and almost half of those who remortgaged opted for a 5-year fixed rate deal.

“LMS’ data also shows 65% of borrowers expect an interest rate rise within the next year, so we expect the trend towards long-term fixed rate deals to continue throughout 2019.”

Kevin Roberts, director, Legal & General Mortgage Club, said: “The government’s Help to Buy scheme has improved affordability for first-time buyers, and with mortgage lenders increasingly offering 95% loan-to-value products, they have unparalleled access to the finance they need.

“The low interest rate environment has also encouraged existing homeowners to remortgage onto longer fixed-term products – giving them certainty over their future repayment costs.”

By Michael Lloyd

Source: Mortgage Introducer

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Home-movers drive mortgage market after a drop in remortgaging

First-time buyers and home mover mortgage lending rose in April, but there was a drop in remortgage business

There were 27,370 new first-time buyer mortgages completed in April 2019, 7.9 per cent more than in the same month in 2018, according to UK Finance.

The trade body, which represents mortgage lenders, also found an increase in home mover mortgages – there were 25,450 completed in April 2019, 6.4 per cent more than in the same month a year earlier.

However, remortgage business fell in April, with an 3.1% drop in borrowers switching their deal compared to a year earlier.

Andrew Montlake, director of mortgage broker, Coreco, said: “Given Help to Buy, the strong jobs market, increased product choice at higher loan-to-values and lower house prices, it’s no surprise first-time buyers were the key driver of activity in April.

“The increase in homemover mortgages also underlines how Brexit indifference trumped Brexit uncertainty in the first quarter of the year.

“During 2019, the whole issue of Brexit has become so surreal that many households are no longer willing to put their real lives on hold for it, all the more so given that interest rates are at rock bottom.”

Buy-to-let holds steady

There were 5,100 new buy-to-let house purchase mortgages completed in April 2019, the same as this time last year, said UK Finance.

There were 14,400 remortgages in the buy-to-let sector, also the same as this time last year.

Montlake added: “What’s interesting is that the impact of recent tax changes on the buy-to-let market appears to have settled down.

“The buy-to-let market is not what it was but has now reached a new equilibrium.”

Written by: Christina Hoghton

Source: Your Money

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The main growth areas are specialist resi and buy-to-let

The main growth areas in the mortgage market are specialist residential and buy-to-let, Louisa Sedgwick, director of sales for mortgages at Vida Homeloans, has argued.

Sedgwick said education is needed to help brokers understand specialist areas. Vida provides webinars, workshops and regional blogs by key account managers.

One area Vida has seen an uplift in is expat buy-to-let since the 2016 EU Referendum.

Sedgwick said: “Any growth in the market has to come from the specialist area and the more education there is, the greater the market will grow. We’re trying to find different ways of educating brokers.

“Before we voted to leave prices were more expensive and since the vote have dropped, making the property market more vulnerable.”

Payam Azadi, director of Niche advice, agreed and said he’d done more expat buy-to-let business this year than previous years.

He added: “As lenders start looking for more margin and diversifying their proposition, they’re going to be going into the more specialist sectors.

“We have seen a lot of lenders diversify firstly into specialist buy-to-let, for example, lending on houses in multiple occupation (HMOs) and expat buy-to-let, but there’s also other sectors lenders have moved into.

“There’s another batch of lenders looking to loosen criteria around adverse credit and others looking at affordability. There are a number of strategies from different lenders. It depends on how they’re funded and what the funders’ risk models are and what margin lenders have to give back to their funders.

“Within the specialist market margins are under pressure, so it’s great saying you’re going into this sector but it’s about how much money you can make there. You’ve seen lenders look at different areas to give edge over competition.”

By Michael Lloyd

Source: Mortgage Introducer

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Limited company buy-to-let criteria is the battleground for lenders

Half a decade ago, there would have been few in the mortgage market who might have predicted limited company buy-to-let as one of the major growth areas in the years ahead. Without reckoning on some considerable government and regulatory intervention, how could they know?

But, that’s exactly what the buy-to-let sector and landlords have been subjected too, and while there appears to be no let up in that regard, the market has shifted to accommodate how landlords might wish to take their portfolios forward and how they can try and secure the mortgage interest tax relief which has been steadily cut for those holding properties in their own names.

While we might not have seen a big move of existing rental properties into limited company vehicles – blame the stamp duty increase for that – landlords are now much more likely to purchase new properties within a limited company vehicle, and because of this, even our very biggest buy-to-let lenders have needed to respond to the shifting nature of the sector.

Indeed, as time goes by, and landlords see how the ongoing cuts to mortgage interest tax relief impact on their profitability, you can’t help wondering if – even with the large stamp duty outlay – landlords might feel they need to bite the bullet and move existing properties (held in their individual names) into those limited companies.

I suspect that if these landlords are looking at holding these properties over the very long-term then a decision might be made to take the stamp duty hit now, rather than later when the property’s value might increase that payment. It is though a fine line to tread as a mortgage adviser and the last thing you should be doing is weighing into such a debate if you’re not also a specialist tax advisor.

Instead, if your client comes with you and wants to discuss this, and they have not already done so with their tax specialist and secured their advice, then you might want to curtail any conversation until they have done so. It may well be the right thing for the client to do but you don’t want to be the individual blamed for such ‘advice’ if its later found out not to be.

Overall, however, the growth in limited company business has come predominantly via new purchase activity and, as mentioned, there are now few buy-to-let lenders who are not offering products for this type of lending. Just last week the Saffron Building Society launched its limited company buy-to-let mortgage and while it perhaps won’t have the considerable impact that its mutual cousin, Nationwide, did when it moved into the sector, it is another potential product option for advisers with clients in this market.

Indeed, you might perhaps say that the limited company buy-to-let client is now incredibly well served in terms of product numbers, and the real battleground for lenders is around the criteria they offer to landlords. Pricing is competitive but what seasoned portfolio landlords are likely to want is a significant degree of flexibility in terms of the administration burden placed upon them in trying to secure a mortgage.

We’ve certainly seen a shift in this direction too, with a number of lenders not requiring business plans now or insisting on a complete run-down of every other property in the portfolio, when it is unrelated to the property which requires a mortgage. While the client’s existing portfolio should be understood, and I completely understand why lenders don’t want to be over-exposed to one landlord or indeed certain types of property, lenders might be historically viewed as over-sensitive in this area. Again, that appears to be changing as increased competition has made itself felt.

There is also an argument that we are at saturation point when it comes to buy-to-let propositions. I saw a recent roundtable of ostensibly bridging lenders who voiced a similar concern and appeared to be coming to the common-sense view that, while they might wish to be involved in the buy-to-let market, unless they could come to it without something new and unique, or they were willing to go incredibly high up the risk curve, there appeared little point in them moving in that direction.

Overall, however, when it comes to finance options, the market appears to be rosy for landlords. Wider problems around increased costs and decreased profitability might persist, but the tenant demand is there, and if they can get new property at the right price, in the right area, within the right tenant demographic, then buy-to-let remains a strong investment for them. And advisers will be fully in demand to work out the best finance to support their activities.

Source: Mortgage Introducer

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First-time buyer activity reaches pre-crisis levels

The number of first-time buyers (FTBs) in 2018 reached its highest level since before the global financial crisis, UK Finance’s latest Mortgage Trends update has shown.

Last year, 370,000 new FTB mortgages were completed, a 1.9 per cent increase on 2017 and the highest number since 2006 when it was 402,800.

In the year FTBs accounted for £62bn of new lending, with £5.2bn of that taking place in December 2018.

Meanwhile, the data showed 30,000 home mover mortgages were completed in the final month of last year, as well as 34,000 homeowner remortgages.

Jackie Bennett, director of mortgages at UK Finance said: “The mortgage industry helped 370,000 people buy their first home in 2018, the highest number in twelve years, as competitive deals and government schemes such as Help to Buy continue to boost the market.

“Homeowner remortgaging also saw strong growth driven by customers locking into attractive rates, a trend we expect to continue in 2019 as more fixed-rate mortgages come to an end.

Ray Boulger, senior mortgage technical manager at John Charcol, said: “These figures confirm that virtually all the growth in mortgage lending in 2018 came from remortgaging and FTBs, with the lion’s share from remortgaging.

“Although we don’t have comparative 2017 figures for product transfers the likelihood is that product transfers also increased in 2018.

“Housing transactions last year fell below 2014 numbers and are likely to fall again this year. UK Finance is forecasting mortgage lending will be flat in 2019 and so with lower housing transactions and prices flat remortgaging will need to increase just to maintain gross lending levels.”

He added the end of the government’s Help to Buy equity share second charge scheme, which allows buyers to e-mortgage to pay off the Help to Buy equity loan, could have a “major impact” on the volume of mortgage lending post-April 2023.

This was “unless before then the private sector steps up to the plate with viable alternative lending options for FTBs with only a small deposit”, he said.

Elsewhere, December saw a 12.5 per cent year-on-year fall in new buy-to-let home purchase mortgages, with a value of £0.7bn for the month.

The fall was also evident for the rest of 2018, where new buy-to-let home purchases were 11.5 per cent lower than in 2017.

Buy-to-let remortgage completions in December 2018 however, rose 25.3 per cent when compared with December 2017, with a value of £2bn.

Matt Andrews, managing director of mortgages at Masthaven, said: “It is interesting to note the continued downturn of buy-to-let activity across the market.

“From tax alterations to regulatory updates, it seems the sector is really feeling the effects of these changes.

“In order to keep the market attractive to buy-to-let investors and to avoid further market uncertainty, greater incentives and lending products will be paramount.”

But Kevin Roberts, director of Legal & General Mortgage Club, said the data demonstrated a resilient mortgage market.

He said: “The number of mortgage products available are at some of the highest levels we’ve ever seen and combined with competitive rates, this is continuing to entice borrowers, particularly first-time buyers.

“For any borrowers unsure of how the current climate will affect them or how they can potentially take advantage of it, speaking to a mortgage adviser is a great place to start.

“Through their extensive knowledge and access to the whole of market, these experienced professionals will be able to match a borrower’s unique circumstances with the right mortgage product.”

Source: FT Adviser

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Mortgage market bolstered by first-time buyers

First-time buyers and remortgages continued to drive the UK housing market towards the end of 2018, as homeowners benefitted from competitive deals and housing schemes.

More than 35,000 new first-time buyer mortgages completed in November 2018, up 5.8 per cent when compared with the same month in 2017 and at a value of £6bn, according to UK Finance’s November Trends update.

The data showed the average age of a first-time buyer was 30 years with a gross household income of £42,000.

Meanwhile, October was a record month for remortgages, reaching its highest level in a decade, according to UK Finance.

Almost 40,000 remortgages were completed, representing a rise of 1.3 per cent when compared with the previous year.

The value, however, remained flat year-on-year at £6.8bn.

Jackie Bennett, director of mortgages at UK Finance said: “A mixture of competitive deals and schemes including Help to Buy saw even more first-time buyers get a foot on the housing ladder during November.

“Meanwhile, homeowner remortgaging activity has steadied, after reaching its highest level in a decade the previous month as a large number of fixed-rate deals came to an end.”

But Steve Seal, director of sales & marketing at Bluestone Mortgages, said: “Whilst it’s promising to see an increase in remortgage and first-time buyer activity, not all buyers are experiencing the same level of growth – particularly borrowers with complex financial backgrounds.

“Self-employed workers, contractors, freelancers or those with credit blips are all growing pools of borrowers struggling to access lending via traditional means.”

He added: “As we enter 2019, we hope to see more lenders accommodating the needs of all types of customers.”

UK Finance also found the buy-to-let market had seen 9 per cent fewer new home purchase mortgages in November 2018 than it did a year earlier, while remortgages in this sector increased by 9.5 per cent.

Bennett added: “In the buy-to-let market new home purchases remain subdued, while remortgaging continues to grow as landlords lock into attractive rates.”

Matt Andrews, managing director of mortgages at Masthaven, said: “The first-time buyer market continues to remain strong thanks to stamp duty relief and government initiatives such as Help to Buy.

“This trend should only continue throughout this year, following the extension of the equity loan element until 2023.

“The withdrawal of Help to Buy ISAs, however, will affect this segment of buyers, so it’ll be interesting to see how these figures play out.”

Source: FT Adviser

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Mortgage market going strong despite Brexit

Despite Brexit uncertainty dominating the headlines in 2018, the mortgage market has proved resilient, with lenders offering an ever-growing choice of products at competitive rates.

Property prices have slowed in many parts of the UK over the past year, notably in London and the South East, creating opportunities for buyers who might otherwise previously have been priced out of these areas. In contrast, places such as Yorkshire and Humberside, and the East Midlands, have seen prices accelerate.

Looking ahead in 2019, it is anyone’s guess what the full impact of Brexit will be both on property prices and the mortgage market.

Purchases

A limited supply of available properties has helped support property prices over the past year, and this is expected to continue in 2019.

Brexit is prompting many buyers and sellers to adopt a ‘wait and see’ approach until we leave the EU. This means that the number of properties being sold is likely to fall over the next three months, according to the Royal Institution of Chartered Surveyors.

Purchase activity may therefore be muted as we head into the New Year, despite the latest figures from UK Finance showing a more upbeat picture, with homemover mortgage numbers completed in October up 4 per cent compared to the same month last year.

Those struggling with affordability will still be able to make use of Help-to-Buy, which will continue to provide a boost for the new build market. The government’s confirmation that the scheme will continue to 2023, albeit within different parameters, will at least give clarity to developers and their forward planning.

Buy-to-let

Buy-to-let purchase activity has been hit by a raft of changes over the past few years, including the 3 per cent stamp duty surcharge on second properties, and the gradual reduction of mortgage interest relief.

This has meant that existing landlords have been more focused on managing their costs and protecting against future rate rises. Remortgage activity has been high as a result and fixed rates have been the product of choice.

Many landlords are opting for longer-term fixes, with five-year deals proving especially popular. Lenders are becoming increasingly flexible too, with some reducing stress rates on long-term fixes.

However, advisers will need to maintain a focus on the product being right for the customer, and not just choosing it based on lending criteria.

The increased use of limited company structures appears likely to continue, as landlords consider whether the structure can help them counter changes to tax relief. However, brokers will need to ensure that the right tax advice is sought by clients.

First-time buyers

The past year has seen strong first-time buyer numbers, with schemes such as Help-to-Buy providing much needed support to those wanting to get on the first rung of the property ladder.

Buyers may also have been helped to a degree by a reduction in competition from landlords. There have been other positives too, including improved product options and first-time buyer stamp duty relief.

Lenders are increasingly willing to offer mortgages to those with only a 5 per cent deposit to put down, and there is also a wide choice of innovative deals available to those who are reliant on financial support from the ‘bank of mum and dad’.

Where next for interest rates?

Given current political and economic uncertainty, it is extremely difficult to predict when, or even in which direction, we will see interest rates move next.

The Bank of England has consistently suggested that rate rises are likely to continue, albeit at a gradual pace. However, if there is a disorderly Brexit, inflation could rise on the back of any further weakening in sterling.

Higher inflation could lead to the BoE increasing interest rates, but there is also potential for the BoE to decide that the economy needs additional support, which could actually result in a cut in the base rate.

Either way, borrowers are likely to continue to lock into fixed rate mortgages to protect themselves against any potential shocks, and to give peace of mind that they know where they stand at a time when everything else is so hard to predict.

Source: FT Adviser