The collapse of Silicon Valley Bank (SVB) was bad news for investors but it may prove good news for mortgage customers.

HSBC bought the UK arm of the bank for £1 in a rescue deal yesterday after it was shut down by regulators on Friday in the biggest bank collapse since the 2008 financial crisis. 

Despite this, the failure of SVB has triggered a series of events, which will trickle down to impact the UK economy, including lower mortgage rates.

Swap rates have nosedived in the wake of the tech bank’s failure, with 0.4 per cent falling off the money market rates since Thursday’s close.

These rates are used by banks and building societies to predict the path of the base rate in the future and is the yardstick by which they lend money to each other. When they are higher, lenders push mortgage rates up so they can maintain a profit.

They have been on the rise since early 2022, thanks to factors including rising inflation, base rate increases and the war in Ukraine although they had recently started to stabilise.

Brokers have said falling swap rates may benefit borrowers as it could mean interest rates will start to fall sooner than had been expected. Some even predicted that the Bank of England may hold rates when it meets later this month, because of volatility in the market following SVB’s collapse.

David Conway, Director at Clayhall Financial Services, said: “The reaction in the market to Silicon Valley Bank’s collapse has seen swap rates nosedive.

“This could prolong the sub-4 per cent market rates and maybe even trigger a reduction in the base rate sooner than expected.”

“Over the past week or two, we’ve seen mortgage rates creep up as it was felt the UK economy is doing better than expected, meaning that it was more likely the Bank of England would hike rates. Now that it looks like they perhaps won’t have the room to do that, I’d expect to see the upward pressure on mortgage rates ease off a bit,” added Rhys Schofield from Peak Mortgages and Protection.

The Bank of England’s next MPC meeting is scheduled for 23 March.

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