Mortgage rates could surprisingly climb in the months ahead, as the Autumn Budget was followed by a spike in swap rates.
The average 1 year swap rate increased by 0.03% to 4.543% the Thursday following the Budget, whilst the average 5 year swap rate was up 0.05% to 4.277%.
As of Monday (4th November) they surged again, with the 1 year rate hitting 4.551% and the 5 year rate climbing to 4.287%.
Jonathan Samuels, chief executive of Octane Capital, said: “The Autumn Statement wasn’t well received by the bonds markets and gilt yields shot up almost immediately, with bond investors understandably concerned about the amount of borrowing announced given that it was more than expected.”
He added: “The mortgage market had been heading very much in the right direction following a very tough period and so the hope is that this initial increase in swap rates is an over reaction rather than the first of a series of bond hikes like that seen following the Truss Mini Budget.
“The hike to second home stamp duty charges certainly won’t help the situation though and should landlords also see the cost of borrowing climb along with mortgage rates, a double-pronged increase in investment costs could give the private rental market a very negative jolt.”
Whilst second homeowners and landlords escaped a hike in Capital Gains Tax, they have been hit with a 2% increase in Stamp Duty Land Tax, with existing and first-time buyers also seeing no extension granted to current relief thresholds which are due to expire from March of next year.
Octane Capital suggested that homebuyers could see the cost of purchasing increase sooner than March 2025, due to a potential increase in mortgage rates.
