Interest rates are going up. Last December the Bank of England raised the base rate for the first time in over three years from 0.1% up to 0.25%. Last week saw a further rise from 0.25% up to 0.5% and more interest rate rises are set to follow later this year.
While we could dive into depth about the economics, inflation, effects of COVID-19, cost of living and so on. This blog will purely analyse the effect on the mortgage market and the effect on existing mortgage borrowers.
Mortgage lenders do not necessarily change interest rate offerings in response to a base rate change. They are constantly manipulating rates due to a whole variety of factors. If a base rate rise is likely, lenders will have already planned for this by increasing interest rates before the announcement. This trend can be seen across the mortgage market right now. Across both residential and BTL mortgages, interest rates have been steadily rising since late last year. HSBC are forecasting two further base rate rises in 2022. Current predictions are for a 0.25% rise in May and the same again in August with base rate finishing at 1% come the end of this year.
For existing borrowers, the type of interest rate you’re on depends how the latest base rate rise will affect your monthly mortgage payments.
- Fixed Rate – no effect on monthly payments
- Tracker Rate – mortgage payments will increase; your lender will be in contact regarding this
- Variable Rate – mortgage payments may increase; your lender may increase their standard variable rate (SVR) which could increase your payments.
For existing borrowers coming up to a remortgage, it’s worth getting this sorted as soon as possible. Most mortgage offers are valid for 6 months so getting in touch over 6 months before your current deal expires is highly recommended. Being on the ball in this climate will more than likely get you a better rate and save you money on your monthly mortgage payments. Don’t wait until your current deal is weeks away from running out to see what terms your existing lender offers you. It’s rarely the best deal, let alone with interest rates rising, as it is not typically available until 3 months before your current deal ends.
If you’re looking to get on the property ladder in 2022, it’s important to know mortgage rates are going up. Rising rates means higher monthly payments. While you don’t want to be rushing into buying if you’re not ready, you equally don’t want to be dallying if you are. For free, professional mortgage advice, get in touch.