So last week the Bank of England left the base rate alone once again and there was no increase in quantitive easing which did not come as a surprise to anyone.  However for those looking at taking out a new mortgage in the new year you may be surprised that deals from the lenders may start creeping up.

The reason for this is that wholesale lending costs have started to increase and this will be passed onto us.  Often called “swap rates” these are the rates at which banks can acquire a fixed price for funding over a period of one to ten years.  The latest Financial Stability Report from the Bank of England suggested that mortgage profitability has been falling so all this leads to lenders looking to raise rates to increase profits.

Don’t despair though I still think that rates are still historically low and whilst the deals that were available earlier in 2011 are not around now there is still enough competition around to ensure you get a reasonable deal.  The tracker rates around at the moment still represent great value for money and predictions are that the Bank of England base rate may not go anywhere until well into 2014.

The difficulty with making the right decision is that the experts get it wrong too so what chance have the rest of us got?  Below are the market predictions from this year: In March/April, a rise was seen as imminent; 
- In June, the forecast was for a hike in July/August 2012;
- By early August, futures markets earmarked early 2013 for the first increase;
- By October, the market priced early 2014 for a rate rise.
- By November, the market priced early 2015 for a rate rise.
- By early December, it suggested late 2015.

source: www.thisismoney.co.uk

These forecasts vary hugely so treat them with caution if you are going to use them to decide what type of mortgage deal you are going to take.  I feel it is important to understand each individual’s circumstances before making a decision, not just what the Bank of England are going to do.

I do think that five year fixed rates are looking very good at the moment of you wanted the absolute certainty of knowing what your payments are going to be and the swap rates for five years have fallen from just over 3% to below 2% now which would indicate that there will continue to be competitive five year fixed rates for the next few months.

Overall I think the moral of my story is talk to an adviser, the recommendation you will receive will be relevant to your circumstances and you will have the protection that comes with taking regulated advice.