Nationwide warns mortgage rates are set to rise

Swap rates are set to put mortgage rates under some pressure in the coming months, Ian Andrew, head of intermediary sales for Nationwide, has warned.

In a video interview with FTAdviser’s Emma Ann Hughes, Mr Andrew told advisers to expect mortgage lenders to increase their mortgage rates in the year ahead, flagging up that they are currently “incredibly low”.

Data published by Mortgage Brain in January revealed the latest figures, as of 1 January 2014, have dropped 26 per cent for the lowest two-year fixed rate with a 60 per cent loan to value, from 1.99 per cent to 1.48 per cent.

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Whilst not as big a drop as 60 per cent LTV deals, rates for 90 per cent LTVs are also down across the board compared to the start of January 2013.

The lowest rate five year tracker with a 90 per cent LTV is now 13 per cent lower, down from 4.09 per cent to 3.54 per cent, closely followed by the lowest rate two-year fix, down 11 per cent from 3.94 per cent to 3.49 per cent, the data revealed.

Mr Andrew said: “You have got two-year fixed rates starting below 2 per cent and five-year fixed rates starting below 3 per cent. These are incredibly low interest rates.

“It does look as though there is a little bit of pressure on Swap rates, even though Bank of England base rate is predicted to probably not rise before 2015. It does look as though Swap rates will probably put mortgage rates under some pressure.

“We have seen some lenders repricing up the way. It does look as though mortgage rates may have bottomed out.

“Many industry commentators are predicting a slight rise in interest rates throughout this year and some are saying maybe long-term fixes should be considered at the moment. But, it is still very competitive compared to where it has been previously.”

Click here to watch this video.