Once again, as expected the Bank of England’s Monetary Policy Committee has kept Base Rate stable. This, whilst becoming a little repetitive, is great news for the Housing Market, anybody who is thinking about re-mortgaging as well as for many other sectors of the UK economy!
One thing that that we have been noticing over the past couple of weeks is the increase in some lenders base rates – the Skipton, as an example, increased theirs by a wapping 1.45% (this without an increase in the Base Rate!). Many people have looked at this as being a precursor to interest rates rising. Whilst this may not be the case, their thoughts of fixing their mortgages could be a sensible choice for the following reasons:
As we get closer to a Base Rate increase, the current of mortgages moving from the Standard Variable Rate or Tracker Rates, will swell, producing a greater demand for these rates. Lenders over the past couple of years have paired back their processing staff. As a result, many may find that they are unable to cope with the demands from borrowers requiring fixed rates in the future. This could well drive fixed rate mortgages up
Also, many people are enjoying the benefit of low interest rates at the moment but they must ask themselves the question – ‘Is my mortgage going to be affordable when rates rise?’ It is sensible for each mortgagor, who is on a variable rate, to take stock, look at the cost of a 1%, 2% and 3% increase in their mortgage costs and work out whether it is affordable and what measures should be put in place to ensure that it is affordable and avoid a potential disaster. (A typical monthly mortgage payment on a £175,000 mortgage, will increase by £145.84 per month for each 1% increase that we see in the future).
So don’t let the grass grow under your feet in the good times – be prepared for increases in rates.
Your home may be repossessed if you do not keep up repayments on your mortgage.