In recent weeks there has been a lot of talk amongst economists and financial journalists regarding the possibility of an interest rate rise. According to the Bank of England’s rate-setting committee,
interest rates could rise as early as November. Here’s everything you need to know:
When will interest rates change?
Financial experts have predicted an interest rate rise for quite some time, but despite months of speculation, rates haven’t risen since 2007. The Bank of England recently held a rate setting meeting and strongly hinted that interest rates could go up in November or December 2017 due to inflation and economic growth.
Despite these warnings, it’s hard to know for sure when rates will rise. There has been talk of interest rate increases before, only for nothing to happen, but it’s wise to prepare for the worst and protect your finances if you’re in a position to.
How much will my mortgage repayments increase by?
The Bank of England controls the base rate, but ultimately it will be up to your lender how much your repayments will increase by.
Repayment increases will vary from person to person and while one homeowner may only experience a very small rise, others may notice a significant change in their financial situation.
The average UK standard variable rate is 4.6%. This means that someone on that rate with a £200,000 outstanding mortgage balance and 25 years remaining would pay an extra £117.10 a month if the interest rate rose by just one percentage point.
If my mortgage repayments are going to rise, how much notice will I get?
Although there is plenty of speculation surrounding interest rate rises, it’s unlikely that you’ll get much notice of your repayments increasing. If the Bank of England does increase the base rate, lenders have the right to increase their interest rates instantly. As a result, homeowners on their lender’s SVR and those with a variable rate or tracker mortgage could see a change in the next bill they receive.
Should I fix my mortgage rate now?
It’s difficult to predict exactly what will happen to interest rates in the coming months, but they’re currently at a record-breaking low. For this reason, if you’re on a variable rate mortgage or your mortgage has slipped onto your lender’s standard variable rate (SVR),
there’s never been a better time to remortgage your home and lock into a secure and affordable fixed rate deal.
By hunting down a mortgage product with manageable repayments and opting for a
fix of two or more years, you can protect yourself from interest fluctuations. You’ll know exactly how much you’re paying each month and won’t have to worry about your repayments increasing.
Will I be able to remortgage?
Although
remortgaging can be a great way to save money, alter your monthly repayments, and improve your finances, strict lending criteria may prevent you from switching to a different deal. In recent years, many lenders have introduced tough affordability tests to ensure applicants can afford the mortgage they want, even if interest rates were to rise.
Frustratingly, these rules can sometimes see homeowners unable to remortgage their properties, even if remortgaging would reduce their monthly expenditure.
To improve your chances of a remortgaging your property with success, get in touch with a mortgage broker. They’ll point you in the direction of the lenders most likely to approve your application.
How much will it cost me to remortgage?
Remortgaging your property can be a great way to save money and protect your finances, but you may be expected to pay an early repayment charge or other fees associated with finding and applying for a new mortgage deal.
In some cases, these fees may outweigh the amount that you’ll save, making a remortgage a counterproductive move. A mortgage broker or financial advisor can calculate the value of your new mortgage and any associated costs for you.
What if I fix my mortgage and rates don’t rise?
Economists seem fairly certain that mortgage rates will rise, but even if they remain the same, you’re unlikely to find yourself worse off financially.
As long as homeowners compare several deals across the market, select the best one for their circumstances, and take fees and early repayment charges into account, they have nothing to lose in fixing their mortgage deal.
Get in touch
To ensure you get the best possible rate for you, it’s wise to get in touch with a mortgage broker. They’ll compare hundreds of deals across the mortgage market before highlighting the ones most suitable for you and your financial circumstances. If you’d like our help,
please get in touch with the TaylorMade team.
