The Bank of England has recently announced plans to scale back their Funding For Lending Scheme, prompting predictions that mortgage rates will rise in the near future. The changes are to be brought into effect as of January 2014, as the Bank of England refocuses its resources on business lending, and pulls the funding currently being put into mortgages.
The Funding For Lending Scheme was launched back in July 2012, designed to provide funding for banks and lenders to enable them to provide cheaper loans to those in more difficult financial situations. It has been a major factor in the all time low seen in mortgage rates this year, with many interest rates the lowest they have ever been and the housing market seeing a considerable boost. The Bank of England has seen the improvement of the housing market as exceeding all expectations, and this has happened more quickly than expected, which is why the decision to rein in the scheme has been made sooner rather than later.
On top of this, savings rates have been forced down by the scheme, so whilst borrowers have been reaping the benefits, savers are actually being negatively affected. It is likely that banks and lenders will push up their interest rates in the months following the end of the mortgage funding, to make up the shortfall, and this will push up rates for savers and make savings accounts more beneficial again.
For those looking to switch mortgages, or take out a low fixed rate mortgage in the near future, the time to act is now, as rates look likely to rise as soon as the changes take place and it is unlikely that the historic low seen in current fixed rate mortgage products will ever been seen again.