Fixed-rate mortgages are governed by what lenders believe is likely to happen at Bank of England interest rates in the coming years. Five-year repairs are almost always more expensive than two-year repairs because they offer better security. But at 3.01% the average five-year loan is now only 0.15 points higher than the standard 2.86% two-year mortgage. Halifax has even released a five-year fixed rate loan, which is cheaper than the two-year interest rate deal. It suggests that some market players fear that the economy is slowing down. This will force the Bank of England to stop raising interest rates or it will risk serious damage. Experts also said that intense competition between lenders and banks’ appetite for risk could also cause unusual movement. Simon Rubinsohn, chief economist at RICS, said the move was either “not very pessimistic about rising interest rates, or there may be more pessimism about the economy because it has to fall.” He added: “What you see there is a fairly flat picture and that tells me that the market expects interest rates to rise a little more. [and] without expecting them to be aggressive. “ Andrew Wishart, a real estate economist at Capital Economics, said the move in homeowners’ lending rates reflects changes in broader financial markets but also more specific trends in mortgages, such as risk appetite. Economists have warned that weak growth means the British economy is now in danger of shrinking as spending is pounded by rising cost of living. The lukewarm GDP growth in February was partly due to a drop in testing and detection and vaccination activity. Vaccination costs fell by 65% during the month as pressure for reinforcement notches pushed by Omicron waves eased. James Smith of ING said: “The abolition of the UK’s vaccine and test campaigns affected growth in February and will continue to do so for the coming months. “In combination with the cost of living crisis, the fall in confidence and the presence of an additional banking holiday, we expect that the growth of the second quarter will be slightly negative.”
