Homeowners and homebuyers should not hold off committing to new fixed rates in hope that rates will fall in the near future, national advice firm Continuum has argued.
The advice firm said many homeowners are currently delaying any commitments to a new fixed interest rate, hoping that rates will fall in future.
Data from the Financial Conduct Authority found last month the value of new mortgage commitments had decreased by 6.6 per cent from the previous quarter to £46bn.
This figure was also 21.2 per cent lower than a year earlier, suggesting many consumers could be holding off securing a mortgage due to uncertainty surrounding the future of rates.
Continuum independent financial adviser, Anthony Harris, said: “Having been advising on mortgages since 1996, the prospect of getting a 5-year fixed rate of 5 per cent or less was always the dream.
“Since the 2008 financial crisis, this actually was less of a dream and far more the norm, though there has always been plenty of argument to say the rates were/have been too low for too long.
“Looking forward, we are now back to ‘normal rates’ and although there is scope for rates to eventually fall a little further, personally I do not see them coming down significantly.”
Instead, Harris said there is a far greater economic incentive for Bank of England base rates to only fall as low as 2 per cent in the long term.
This could mean mortgage rates might come down to 3 to 3.5 per cent long term but Harris said he does not see that happening in the next 12-18 months.
While new clients turning to Continuum for their mortgage needs are often initially interested in 2-year fixed rates or tracker rates, the firm stated that often a 5-year fixed rate may be ultimately more suitable for them.
“Some of the current 5-year fixed rates at 4.5-5 per cent are not unreasonable. Assuming this meets client affordability, I am very happy to recommend, due to the stability that they offer,” Harris added.
“For me, a mortgage is still a long-term commitment and therefore clients should consider all options that might make that long-term commitment more affordable, no matter what happens in the outside world.”
tom.dunstan@ft.com
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