Are we at the bottom of the mortgage interest rate cycle?



Over the last few days there has been more comment about negative base rates in the UK and how these might impact mortgage interest rates. Surely, we must be at or near the bottom of the mortgage interest cycle? Even taking into account reduced borrowing costs, mortgage companies still have their running costs and surely their profit margins must be looking wafer thin just now? Any further reductions in UK base rates will help to keep mortgage interest rates lower, but I can't see any huge reductions as a consequence.


Not yet, but how much impact any further down the movement will have on the mortgage market is debatable. There is growing talk that UK base rates will move into negative territory in the short-term. What impact this will have on the economy is debatable. Surely the blunt instrument of interest rates has outgrown its use at the current levels?


Active Member
I agree, negative interest rates will certainly reduce the chance of mortgage rates increasing in the short-term. However, how far further downwards they will pull mortgage rates, I am not quite sure. Remember, there still needs to be a profit margin for mortgage finance providers. I think many of them are at/near the bottom of the range where they can actually make a profit.


Personally, I think we are past the point when interest rate reductions will have any material impact on mortgage rates - or the economy for that matter. We are now at the stage where we need fiscal stimulus as opposed to simple borrowings.