Low mortgage rates are temporary blip
Posted on April 5th 2010
What would the average person on the street or indeed the average mortgage professional guess was the average BBR rate over the last 35 years? My guess would have been around 5% and I would bet that many borrowers may indeed guess even lower than that. The average BBR 1975-2010 was in fact 8.3%, more interestingly is that in that period 3244 business days had a BBR in excess of 10% or in other words 36% of the period or around 12.5 years.
My first mortgage in 1989 when I was a mere 19 years of age was a very competitively priced 12.75% fixed for 5 years with the Halifax. My point is that we have all got quite comfortable if not downright joyous about how low our mortgage payments are but the reality is that this is just a temporary blip. We should all be trying now to establish what our plans would be given the inevitable increase in rates and whether a fixed or capped rate might be worth considering, even though they may look a bit expensive at the moment.
Swaps are pretty low right now but as soon as there is a sniff of evidence about rate rises they will shoot up and because this is the rate at which fixes are normally pegged the current deals might actually be a bargain. 5 year Swaps are running at c2.7% so any deals that are sub 5% look like a decent bet, but of course the tricky part is how you advise a borrower in such a period of unprecedented interest rates. I will leave that up to the experts.
