Are you worried about the recent interest rate rise and how it will affect your mortgage? Here’s what it means for you and why remortgaging may be a good idea for some homeowners.
Last week The Bank of England decided to increase the base rate from 0.25 to 0.50 per cent in a bid to combat rising inflation. If you’re on a fixed-rate mortgage loan, you can breathe a sigh of relief and know that your monthly payments won’t be affected during the fixed-rate term of your mortgage.
If you’re on a standard variable rate, your lender may decide to pass on the rate increase to you, which means your monthly payments would go up. If you’re on a tracker rate mortgage, you will certainly pay more each month as tracker rate mortgages are directly linked to the base rate.
Future rate rises predicted
There are also rumours of further interest rate rises in the coming months. Inflation is predicted to reach seven per cent by the spring, which means interest rates could rise again. The Monetary Policy Committee (the body at the Bank of England responsible for setting interest rates) is meeting again in March and May to discuss this. While it’s impossible to say for sure what will happen, it’s possible that rates will increase on both occasions.
This means that the cost of borrowing will rise. At present, it’s still relatively cheap to borrow and there are some competitive mortgage loans available, but lenders’ rates are likely to increase.
Seek advice on remortgaging
If you’re currently on a standard variable rate or a tracker rate mortgage, we’d strongly recommend talking to a reputable mortgage broker to see if it’s worth switching. Remortgaging could be an effective way for you to save money if you can secure a cheaper interest rate.
If you’re on a fixed rate deal, while you won’t be affected by the base rate increase, it’s important to check when your fixed term comes to an end. When your fixed-rate term is up, you’ll be placed on your lender’s standard variable rate, which is usually higher and is also likely to be at the mercy of future rate increases.
Ideally, you need to be looking into a new mortgage six months before your fixed-rate term ends.
What if you’re about to take on your first mortgage? Are there still good mortgage rates available? At the moment, yes, but don’t delay your plans. Some lenders have increased their interest rates. So, while the mortgage market remains fairly competitive, rates are going up and now is a good time to explore your options.
We’re here to help with advice on switching your mortgage. Contact us today to arrange a free consultation.