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You can find the current article at its original source at http://www.theguardian.com/money/2016/jun/20/brexit-vote-mortgage-rates-drop-investors-government-bonds
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| Potential Brexit vote sees mortgage rates drop | Potential Brexit vote sees mortgage rates drop |
| (about 20 hours later) | |
| The cost of taking out a fixed-rate mortgage over five or 10 years has fallen to a record low, in a surprise side-effect caused by money markets reacting to a possible Brexit. | The cost of taking out a fixed-rate mortgage over five or 10 years has fallen to a record low, in a surprise side-effect caused by money markets reacting to a possible Brexit. |
| Exclusive figures prepared for the Guardian by financial firm Moneyfacts show the average interest rate on a five-year fixed-rate deal has fallen to 3.16%, down from 3.18% a month ago and 3.34% in June 2015. Meanwhile, the average cost of fixing for 10 years is 3.46%, down from 3.49% last month and 3.7% a year ago. | Exclusive figures prepared for the Guardian by financial firm Moneyfacts show the average interest rate on a five-year fixed-rate deal has fallen to 3.16%, down from 3.18% a month ago and 3.34% in June 2015. Meanwhile, the average cost of fixing for 10 years is 3.46%, down from 3.49% last month and 3.7% a year ago. |
| Related: How EU vote will affect prices, property and pensions, plus lakeside homes | Related: How EU vote will affect prices, property and pensions, plus lakeside homes |
| As investors have poured out of risky shares and into assets considered safer, such as government bonds, the result has been a fall in the “yield” on these bonds. In turn, this feeds through to lower mortgage rates. | As investors have poured out of risky shares and into assets considered safer, such as government bonds, the result has been a fall in the “yield” on these bonds. In turn, this feeds through to lower mortgage rates. |
| In recent weeks, several major lenders have reduced rates on five-year deals for both owner-occupiers and buy-to-let investors, and on Wednesday the UK’s biggest building society, Nationwide, reduced five- and 10-year fixes by up to 25 basis points. Its lowest priced 10-year mortgage has a rate of 2.99%. | |
| However, these record low deals may not last for long. Yields on 10-year bonds hit an historic low last week as opinion polls suggested the UK may vote to leave the EU at Thursday’s referendum. On Friday, as the polls swung towards remain, yields started to increase again. | However, these record low deals may not last for long. Yields on 10-year bonds hit an historic low last week as opinion polls suggested the UK may vote to leave the EU at Thursday’s referendum. On Friday, as the polls swung towards remain, yields started to increase again. |
| Ray Boulger, senior technical manager at mortgage broker John Charcol, said the fall in yields was the prime driver behind lower mortgage rates, and a clear sign of what would happen following a Brexit vote. “If you are betting on Brexit then there is probably some merit in holding off from fixing your mortgage, although the scope for rates to fall further is pretty limited,” he said. | Ray Boulger, senior technical manager at mortgage broker John Charcol, said the fall in yields was the prime driver behind lower mortgage rates, and a clear sign of what would happen following a Brexit vote. “If you are betting on Brexit then there is probably some merit in holding off from fixing your mortgage, although the scope for rates to fall further is pretty limited,” he said. |
| Boulger said lenders had not passed on all of the falls to consumers. “If we do vote to stay and we get a little bit of a bounce in yields we are not going to see much of an increase in rates,” he added. | Boulger said lenders had not passed on all of the falls to consumers. “If we do vote to stay and we get a little bit of a bounce in yields we are not going to see much of an increase in rates,” he added. |
| However, the chancellor has warned that mortgage borrowers will be hit by a Brexit vote if the Bank of England has to act to defend sterling. Commentators have suggested that a plunge in the currency will force the Bank to raise base rate, and in turn mortgage rates will rise. | However, the chancellor has warned that mortgage borrowers will be hit by a Brexit vote if the Bank of England has to act to defend sterling. Commentators have suggested that a plunge in the currency will force the Bank to raise base rate, and in turn mortgage rates will rise. |
| For now though, the message to existing borrowers is that they can switch deals to make savings. Research by legal firm LMS found that more than half of people who remortgaged in May moved on to a better interest rate. A third of remortgagers reduced their monthly outgoings, while others increased their borrowing or shortened their borrowing term. | |
| Andy Knee, chief executive of LMS, said increased competition between lenders, record low rates and rising house prices provided a setting “ripe for remortgaging”. | Andy Knee, chief executive of LMS, said increased competition between lenders, record low rates and rising house prices provided a setting “ripe for remortgaging”. |
| “It is clear that many savvy borrowers are taking advantage of the current climate and we expect activity to maintain its momentum,” Knee said. “With an uncertain economic climate, knowing what your mortgage payment will be for five years is a very seductive offering for many remortgagers.” |