Financial experts are warning that another interest rate rise is on the horizon, with rumours suggesting it could increase as early as the 28th February.
This will be the second interest rate rise in a matter of months, after the Bank of England increased interest rates from 0.25% to 0.5% in November.
It’s believed that another interest surge will see banks scrambling to win savers over with higher interest rates, but those taking out a mortgage may be subjected to higher repayments than those who lock into a deal before the 28th.
What should homeowners do?
The Bank of England believes that the extremely low mortgage rates that we’ve experienced in recent years are responsible for soaring house prices.
It has been suggested that an interest rate rise could help to improve the economy by forcing lenders to make their mortgages more expensive.
However, this is of course bad news for homeowners, particularly those with a variable rate mortgage or a mortgage that’s approaching the end of its fixed rate period.
Do you have a variable rate mortgage or are you on your lender’s Standard Variable Rate (SVR)?
If you have a variable rate mortgage or your mortgage has been moved onto your lender’s standard variable rate (SVR), it should be relatively straightforward to remortgage your property and protect yourself from higher interest rates.
We’d recommend comparing a number of mortgages to see if you can find a more affordable deal. A mortgage broker can help you identify the best mortgage products for you while also pointing you in the direction of the lenders most likely to approve your application.
Locked into a fixed rate deal?
If you’re currently locked into a fixed rate deal, you can be sure that your repayments won’t rise until your deal expires. However, once your deal does expire, you’re likely to face higher repayments than you do now.
Although you’re still in your fixed rate period, you may be able to remortgage your property and access a better deal. You’re likely to face fees and early repayment charges when doing so, but this can often work out much cheaper than staying in your current deal and risking much higher interest rates when it expires.
What should home buyers do?
If you’re looking to buy a property in the near future, we’d advise comparing a multitude of deals to ensure you find the most affordable one for you. When you find a mortgage you can afford, it’s worth considering a fixed rate period. By locking yourself into a specific deal for 2, 5 or even 10 years, you can protect yourself from interest rate rises and ensure your mortgage repayments remain the same.
On the downside, a fixed rate period could see you missing out on even better interest rates if the Bank of England’s base rate was to fall. However, at this moment in time, a reduced rate seems unlikely.
What should savers do?
If you’re a saver, an interest rate rise could be good news for you. You may see the amount of interest you earn on your savings increase. In a bid to win over new customers, banks are likely to compete with one another to offer the most generous rates. Comparing multiple bank accounts could help you grow your savings faster.
Whether you’re a homeowner looking to remortgage your property or you’re a first time buyer in need of help finding the best deal for you, we can help. Please get in touch with our team of mortgage brokers to lock yourself into an affordable mortgage before interest rates increase.
