The Press and Journal (Aberdeen and Aberdeenshire)
Presidential promises put us on a road to rate rises
Will Donald Trump increase your mortgage payments? Allan Gardner, financial services director at law firm Aberdein Considine, says it is more fact than fiction
After months of noise, accusations and scandal, Donald Trump has finally taken his seat in the Oval Office as the 45th president of the United States.
Even now, it seems surreal – but it is reality and we now need to adjust to what this means for the global economy.
Some Press and Journal readers may have seen recent reports speculating on the fact that Trump’s presidency might push up UK mortgage interest rates.
Regrettably, this one appears to have more fact than fiction about it.
An election win built on promises of an improved US infrastructure and the building of roads, airports, tunnels, railways and the occasional wall down Mexico way means there is a high probability that the Federal Reserve will need to increase interest rates.
And the old saying that when the US sneezes we usually catch the cold stands true – meaning that
“If US rates go up, then the UK will most likely follow”
if US rates go up, then the UK will most likely follow.
In addition to this, we have seen swap rates, which usually influence mortgage rates, rise sharply since August.
The cost of five-year money more than doubled between August and November last year, from 0.43% to 0.90%.
Even so, the cost of fiveyear fixed rates is still relatively low and, according to the Council of Mortgage Lenders, home loan affordability has hit a historic low for both home movers and first time buyers.
The market is, therefore, still seen as being cheap for anyone looking to buy a property or secure new rates when their current deal comes to an end.
The average five-year fixed rate is below 3% for the first time and, while it might not stay like that for too long, it’s a great time to lock into medium-term, fixed-rate deals safe in the knowledge they probably won’t go any lower in the short-term.
So my advice is this – now is the time for any borrower to really look at what they are paying and consider if they would be better off restructuring their mortgage to capitalise on longer-term fixed rates, or even look at two-year deals which are running at below 2%. It amazes me how people will shop around for hours on end to save money on the likes of a television, but ignore the fact that they could save money every month by looking at all the options available to them through an independent mortgage adviser.
Most lenders will keep a mortgage offer open for three months, which gives you plenty of time to get things sorted before your old deal comes to an end if you act quickly and take proper independent advice on what is best for you.
So don’t let The Donald’s infrastructure promises end up costing you more – get independent advice on your new mortgage, whether you are moving house, buying your first home or just need to look at your current deal.