Mortgage Interest Rates Set to Rise – What does this mean for you?
At Advantage we have had many enquiries following the recent news that the Bank of England are potentially increasing the Base Rate over the coming months. Our first response is always….Don’t Panic!
What is the base rate and why does it matter?
The base rate is set by the Bank of England and is important to homeowners because it acts as a benchmark for the cost of borrowing money – the lower the base rate the lower interest rates. If the base rate goes up so, inevitably, will mortgage interest rates.
What is the base rate right now?
Last month/September the Bank of England agreed to keep the base rate at 0.1% where it has stood since March 2020 to help control the economic shock of Covid-19.
This is an absolutely rock bottom level – at the start of 2020 it was 0.75%
When could interest rates go up?
Early next year is looking likely – potentially there will be a rise of the base rate to 0.5% in early 2022 and by the end of the year it could have inched up to 0.75%
What can I do to prepare?
This will depend on the deal you are currently on.
If you’re on a long term fixed rate product, then you’re unlikely to need to do anything. You’re interest rate will be unaffected by the potential changes until your deal comes to an end.
If you’re on a shorter term fixed rate product, that is due to expire next year, you may want to speak to a broker about your options. Again, it’s unlikely that you would need to do anything immediately, however your adviser will be able to take you through the options.
If you’re on a Variable product, an increase in the Base Rate is likely to have an impact on your monthly mortgage payments, and it would definitely be a good time to speak to an adviser sooner rather than later.
In each scenario above, many deals come with penalty clauses for early repayments which could wipe out the cash benefits of their lower interest rates. Again, this is where a broker can guide you and calculate any potential changes it would cost you to switch products.
Most importantly, Don’t Panic!
Economic experts think it is highly unlikely the base rate will rise substantially in the foreseeable future – partly because of the spectre of repossessions, a hallmark of previous recessions, and to avoid exerting extra pressure on businesses already struggling to deal with shortages of staff and raw materials.
The Bank of England will need to balance the need to curb inflation with the need to help support a post-pandemic recovery — particularly with the furlough scheme coming to an end.
If you have any concerns about your current mortgage, or how these changes may affect your future plans to secure a new mortgage, please do get in touch and we would be happy to discuss your individual situation.
Learn more about your mortgage journey with AdvantageFS.
Tel: 0117 4420604
Email: Info@advantagefs.co.uk
