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The Bank of England has indicated that the UK will see a rise in the Bank of England base rate in coming months. The BOE base rate has been at a historically low level of 0.1% since prior to the pandemic.
This article focuses on the reasons why there will potentially be a rise in interest rates and equally as a borrower the effects and what steps can be taken to improve your position.
The rate of inflation refers to increasing costs for things like our weekly shop and our energy bills. Consumers are already being affected by manufacturers passing on increase costs due to the rising costs of labour, energy, materials, and transport.
The Bank of England is targeting to halve inflation to 2% and a significant factor in achieving this is to increase interest rates to slow down inflation growth.
Impact of a base rate rise
The Bank of England base rate is a benchmark for the cost of borrowing. If the Bank of England base rate increases, this will affect borrowing through mortgages, loans, and credit cards. As providers pass on the increased costs to consumers.
The bottom line is that if the base rate rises so will the cost of borrowing.
The effect on mortgages
As the banks base rate potentially increases, so will the cost of mortgage borrowing. Therefore, lenders will increase their rates for new mortgage borrowing. This will impact first-time buyers, home movers, remortgages and equally investors.
Approximately 20% of borrowers in the UK are either on variable or tracker rate products. This type of product will be most immediately affected with any base rate increase as lenders will pass on the cost relatively quickly. So, your monthly mortgage cost is likely to increase imminently.
For those borrowers with a fixed rate, whilst within the fixed rate period your deal will not be affected. However, now is a good time to review when your fixed rate period ends and ensure you have this prioritised to review. If your scheme ends within the next six months, then we recommend starting the review process now.
What can you do?
For new mortgage borrowers, speak with a broker who has access to whole of market to assist you find the best deal.
For existing mortgage borrowers, check your existing scheme. If you are on a variable or tracker rate or your fixed rate ends within the next six months, schedule a review with an independent broker as soon as possible.
The overall advice would be to act and review your options. Whilst some lenders have already increased product pricing there are still some fantastic mortgage rates available. The sooner, that you act and review, the more likely you are to be able to secure lower rate borrowing.
Are you in a fixed rate for longer than the next six months? If you are paying a higher-than-normal interest rate, it is still worth reviewing your options. MMPE can work with you to take account of factors such as, early repayment charges both your existing and potential new interest rates. Then review if it is worthwhile switching to a new deal. Equally, you may decide that it is worthwhile paying penalties and switching if it gains you a longer more preferential deal.
My Mortgage & Protection Experts are independent, whole of market mortgage brokers, who can assist with providing guidance and advice in securing you a mortgage. Act now and review your mortgage options, delaying a decision could lead to you paying more for your mortgage.
My Mortgage Experts & Protection Experts Ltd (FCA 937076), is an Appointed Representative of King Mortgages Ltd.
King Mortgages is authorised & regulated by the Financial Conduct Authority (FCA). King Mortgages Ltd is entered on the financial services register http://register.fca.org.uk/ under reference number 803561.
The information contained within this website is subject to the UK regulatory regime and is therefore primarily targeted at consumers based in the UK.
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Changes in property value, coupled with a potential reduction in your loan amount (with a repayment mortgage), mean a change in the equity available in your property (Loan to Value); hence there could be improved opportunities for a better mortgage for you.
Sussed will track when your mortgage is due to expire (usually when your mortgage payments rise substantially as you will automatically transfer to your lender’s standard rate).
The app will alert you when it’s the right time to discuss your options with your mortgage broker.
Sussed can help you plan.
This feature is ideal for today’s economy and increasing prices. Sussed will continually scan the market, looking for the best-fixed rates available, especially when interest rates are rising.
Using a series of algorithms, our clever technology can identify longer-term fixed rates available today that could save money against predicted rates at the end of your current product term (including the cost of transfer) – sussed is doing all the hard work.
With automatic property value updates and your Mortgage information loaded, this feature calculates the amount of equity and the maximum potential loan that may be available within a landlord’s portfolio. This will assist with seeing if there is the opportunity for to perhaps buy another property from leveraging your portfolio.
Within sussed, you will also be able to see each of your properties with a roadside picture, a confirmed property value, monthly rental, current mortgage balance, payments, interest rate and the Loan to value/Gross rental yield.
Sussed can help you manage your portfolio.
This feature is there waiting for interest rates when they reduce. Using the same technology as Rate Riser, sussed will identify if your current deal is now able to be improved.
Should the interest rates decrease, sussed will compare deals available on the day with your existing deal and flag if there is an opportunity for you to save money by switching.
There are price limits on homes you can buy with an equity loan. The limit is different for each region in England.