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Increased interest rates, inflation and mortgage rates rising. With The Bank of England drastically increasing the base rate to 2.25%, the question on everyone’s mind is, what does this mean for me?
Why have they increased?
Firstly, let’s briefly summarise the situation. The current inflation rate is 9.9%, which is much higher than the government's target of 2%. Therefore, it is the responsibility of the Bank of England to take action in order to bring inflation back down to the target rate. One way they can do this is by increasing interest rates.
Mortgage rates have already been increasing throughout the year but when the financial market is suddenly impacted e.g. with the fall of the pound, inflation will go up further.
Many report that interest rates will only continue to rise. The BBC reports that by next year they could reach 6%. With around two million people already seeing an increase in how much they pay for their mortgage, more and more UK homeowners will be affected.
Take a look at what this looks like:
What does this mean for my mortgage?
If you're a first time buyer, moving home, or remortgaging, you may be affected by the changes. If you have a fixed-rate deal, your monthly repayments won't change until your current deal ends. First time buyers have the difficult task of navigating this market with already excruciatingly high property prices.
Depending on what mortgage you have, you may see an increase straight away. Tracker, Standard Variable Rate and Variable Mortgages are expected to be affected almost immediately by the increase in interest rates.
However, if you are on a fixed rate mortgage, you will only be affected when that expires. Whatever, your mortgage, the temptation to remortgage may be strong. Interest rates are expected to rise but anything could happen, so be wary. You can lock in a mortgage rate now and begin paying in six months time but that could be a risk.
Right now, because of these high interest rates, people will find it difficult to borrow, thus difficult to buy a house. But with such a demand for property and increase in how prices, could now be the time to sell and remortgage? Only time will tell.
At Zoom, we understand how difficult it is to stay on top of all these updates to the market during uncertain times. That’s why we’re here to help. If you’re looking for your first property or simply want to know whether to remortgage or not, get in touch. We’d be glad to help.
T: 0333 358 3095 Lines answered 8-8 Mon to Fri,9-5 Sat, Calls monitored on Sun
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