Last week, the Bank of England raised the base interest rate again from 1.75% to 2.5%. This is in response to the ongoing cost of living crisis. Their aim is to cool the economy and bring inflation back down to around 2%.
With interest rates rising significantly this year, many will be wondering how that affects their mortgage or potential mortgage.
How is my current fixed rate mortgage affected?
If you already have a fixed mortgage, your repayments will not change. That is the nature and the benefit of a fixed rate, especially during these times. However, rates are increasing outside of your fixed rate. If your product term is nearing an end, you are likely to see an increase in your repayments when that finishes.
Therefore, if you have years left to run on your fixed term then you do not need to worry. If you are 6 months or less away from the end of your term then you should start to consider remortgaging.
You will not be able to fix onto a deal similar to your current one because rates have increased so much. But rates are expected to increase further over the next 12 months. That is why it is a good idea to secure a new fixed deal at today’s prices rather than next year’s rates.
What if I am looking for a mortgage now?
Following the recent interest rate rise, lenders will start to increase their prices very quickly. Fixed rate products will take around 1-3 weeks to increase from most lenders as they react to the news. For those of you looking at securing a mortgage, it really is the sooner the better. The Bank of England meet every 6 weeks to discuss potential interest rate changes. It is expected that in 6 weeks time there will be another rate rise. That is why getting locked in to fixed rates now will benefit you longer term.
If you are looking to move things on quickly, we are perfectly placed to help with this. Our efficient mortgage advice service will not leave you waiting and we understand your urgency. Get in touch with us today for your free initial meeting and we can get the ball rolling for you.
Can I remortgage early to get a new fixed deal?
Technically, yes. However, most fixed term products come with an early repayment charge. This is paid when you end the mortgage before the fixed term has finished. If you are unsure about whether your particular mortgage comes with an early repayment charge, it is best to check with your lender or send us your paperwork.
Even with an early repayment charge, it may still be worthwhile paying it and remortgaging as soon as possible. This will vary from situation to situation so you are best to consult us and we can calculate the best route for you.
Summary
With the Bank of England base rate now sitting at 2.5%, there is likely more to come. We could see interest rates at or above 3% before the end of the year, and some experts have not ruled out interest rates of 5% by the end of next year. This all depends on how the economy and inflation react in the short term.
Should you have any further questions or concerns, please get in touch and we will be happy to help. Our no obligation initial meeting is free of charge and we can clarify any points you are unsure of.
