Octane Capital has warned about the effects of rising swap rates following the Autumn Statement, suggesting that homebuyers may face higher borrowing costs.
Jonathan Samuels, CEO of Octane Capital, said homebuyers should prepare for potential increases in mortgage rates alongside the 2% increase in Stamp Duty Land Tax (SDLT) for second homeowners and landlords.
Existing and first-time buyers found no extensions to current relief thresholds in the Autumn Budget, which are set to expire in March next year.
Octane Capital’s analysis indicated that the increase in swap rates might signal rising costs of purchasing sooner than March 2025.
Samuels said: “The Autumn Statement wasn’t well received by the bonds markets and gilt yields shot up almost immediately, with bond investors understandably concerned about the amount of borrowing announced given that it was more than expected.”
According to Octane Capital, the average 1-year swap rate rose by 0.03% to 4.543% following the Budget, while the average 5-year swap rate increased by 0.05% to 4.277%.
Although these rates eased slightly by Friday 1st November, they remained above pre-Budget levels.
As of Monday 4th November, the 1-year rate hit 4.551 and the 5-year rate climbed to 4.287.
Samuels added: “The mortgage market had been heading very much in the right direction following a very tough period and so the hope is that this initial increase in swap rates is an overreaction rather than the first of a series of bond hikes like that seen following the Truss Mini Budget.
“The hike to second home stamp duty charges certainly won’t help the situation though and should landlords also see the cost of borrowing climb along with mortgage rates, a double-pronged increase in investment costs could give the private rental market a very negative jolt.”
