FOLLOWING escalation in the Middle East over the weekend, with Iran and Israel exchanging missile strikes and the oil price once again edging up, brokers have warned that the risk of the ceasefire ending could send mortgage rates north — and urged borrowers, where possible, to secure a rate.
Manooch Suree, Director at Uxbridge-based Zinga Financial Services, said that renewed tensions in the Middle East could feed through very quickly into mortgage pricing, reversing the trend of recent weeks.
He added: “The key link is energy markets. If the conflict pushes oil and gas prices higher, that can reignite inflation concerns and lead to higher swap rates, which lenders use to price fixed rate mortgages.
“We’ve already seen in recent months how quickly global events can affect mortgage rates, with some lenders repricing products upwards when markets become volatile. It doesn’t necessarily mean rates will surge overnight, but it can slow or reverse the downward trend borrowers had been hoping for.
“My advice to borrowers is not to panic, but not to sit on their hands either. If your mortgage deal is ending in the next three to six months, now is a sensible time to review your options and potentially secure a rate.
“Most lenders allow you to lock in a deal in advance and switch again later if rates improve before completion.”
Short notice
Thomas Boughton, Founder at London-based Artillium Real Estate Finance, agreed that “in periods of uncertainty, lenders often reprice fixed rates at short notice”.
He reminded people that locking into a rate now doesn’t mean you have to stick with it: “Borrowers need to be reassured that they are not necessarily tied to the rate available when they apply. If rates improve before completion, we can move them onto a more favourable option.
“Tools such as Nationwide’s rate reservation facility provide additional protection, allowing us to secure today’s rate for up to 90 days while still benefiting from any reductions. This proved invaluable for many clients following the first strikes earlier this year.”
Mirroring Suree, Gaurav Shukla, CEO at Marlow-based Home Me Mortgages, said increased tension in the Middle East, coupled with concerns that rising oil prices will further fuel inflation, “has the potential to put upward pressure on mortgage rates”.
He continued: “If inflation remains elevated, markets may scale back expectations of future rate cuts, causing swap rates to rise and potentially increasing the cost of fixed-rate mortgages.
“At this stage, it’s a risk rather than a certainty. Markets will be watching closely to see whether this is a short-lived flare-up or the start of a more sustained period of instability in the region.”
Be proactive
Emma Jones, Managing Director at Runcorn-based Whenthebanksaysno.co.uk, urged borrowers to be proactive.
She said: “In a market as volatile as this, we encourage all borrowers, both first-time buyers and those approaching the end of their current mortgage deal, to lock into a rate just in case rates start to rise. Being proactive has never been more important.”
Riz Malik, Independent Financial Adviser at Southend-on-Sea-based R3 Wealth, said: “Oil has gone up by just under 5% after the weekend’s missile exchange so the outlook is not great.
“As strategic reserves deplete and given that we’re now over three months into this disruption, we could see bigger spikes in mortgage pricing as a ceasefire seems less and less likely.”
Harry Goodliffe, Director at Winchester-based HTG Mortgages, said: “Banks hate uncertainty, and when markets get nervous, borrowers often feel it, too. This won’t send mortgage rates soaring overnight, but if higher oil prices fuel inflation, homeowners will end up paying the price.”
