Categories: government and politics | government and politics buy to let mortgages
government and politicsRecent developments in the Middle East have renewed uncertainty across financial markets, prompting questions about what this could mean for interest rates and mortgage pricing in the months ahead.
Current market movements serve as a timely reminder that mortgage rates are shaped by a complex mix of factors — not just swap rates, but also economists' expectations and global risk dynamics.
Trump's pursuit of a 'deal'
Israel agreed a fragile ceasefire with Lebanon, on the basis that Hezbollah (the Lebanese paramilitary group) stop their attacks. However, Hezbollah have refused these terms.
Meanwhile, Donald Trump has reiterated that the US and Iran are "pretty close" to a deal, which would prevent Iran from developing or obtaining nuclear weapons. This was the pretext for the US attacking Iran earlier this year.
Despite Trump's optimism for a deal being signed by this weekend, the expanded conflict in the Middle East is caught in a frustrating deadlock, offering little assurance for global businesses hoping for a fast conclusion to the whole war.
One of the biggest concerns following the escalation of this conflict has been the potential impact on global energy prices.
Higher oil and energy costs can contribute to inflation, which in turn may influence expectations around future interest rate decisions.
Impact on borrowing
For mortgage borrowers, this matters because lenders look at swap rates when pricing mortgage products. Swap rates are influenced by market expectations and move independently of the Bank of England's Base Rate.
If inflation proves more persistent than expected, markets may begin to scale back expectations of future rate cuts. Current expectations from economists are leaning towards another decision to hold the Base Rate at the next Monetary Policy Committee (MPC) meeting.
While all this does not necessarily mean mortgage rates will rise, it could make it harder for rates to fall as quickly as some borrowers had hoped.
Lenders seizing the gaps
Despite the uncertain state of affairs at the moment, some lenders are capitalising on gaps in the market by releasing competitive products, with one in particular promoting variable-rate ‘tracker’ products with low fees.
Tracker mortgages automatically go up or down in line with the Base Rate. If the MPC continue to hold the Base Rate until the geopolitical storm passes, then resume their previous rate-cutting agenda to curb inflation, these product types may be appealing to property investors.
For landlords who do not want the MPC’s decisions to directly impact their mortgages, there are also plenty of compelling fixed-rate products on the market which will not change in line with the Base Rate.
Don't let uncertainty delay important decisions
Trying to predict the exact direction of mortgage rates is difficult, particularly when global events are influencing financial markets.
Focus on what you can control
For landlords with mortgage deals due to expire in the coming months, the message is not to wait and hope rates fall. Reviewing options early can help you understand what is actually available.
Many lenders allow borrowers to secure a new deal 3-6 months before their existing rate expires. This can provide flexibility if market conditions change, while reducing the risk of being forced into a decision at the last minute.
Speak to one of our specialist buy to let advisors
If you are reviewing your portfolio or considering your next investment, Commercial Trust can help you understand the finance options available.
Contact our advisors today to discuss your plans.