Bond Yields and Swap Rates changing

19/06/2007

In the last decade house prices have trebled however rising yields in global bond firms may decide to decrease.

Over time property prices have withstand four interest rate increments simply because of the popularity of fixed-rate deals which have allowed most borrowers to keep their payments stable.

A benchmark via fixed-rate mortgages – two-year swap rates have increased to 175 basis points during the past 18 months, leaving many lenders to offer fixed-rate loans at a staggering 6 per cent.

The Council of Mortgage Lenders feel that more than two million fixed-rate loans will end over the next 2 years, with most people facing mortgage rate increases of between 75 and 150 basis points.

Buckley concluded that borrowers would face an average increase of 1,500 pounds each year via their mortgage bills.

The Royal Institute of Chartered Surveyors indicated that nearly 5 per cent of buy-to-let investors ‘gave up’ during the first quarter of 2007, this figure highest in two years.

"A large number of people will be remortgaging in a rising interest rate environment," commented a spokesman at the CML. "We expect this will contribute to a slowing housing market."

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