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February Mortgage Update: What is happening with mortgage rates this month?

At the start of February, the Bank of England increased the based rate to 4%. This was the 10th increase in a row and may have left you wondering what this means for mortgage rates. So for our February Mortgage Update, Adam Nanson, Managing Director at Your Mortgage Expert looks at what is happening with mortgage rates this month.

Has the base rate rise to 4% increased mortgage rates?

“It was no surprise to the industry that that Bank of England increased the interest rate on 2nd February. The lenders knew this was rate rise coming and, in the main part, the increase had already been  built into their mortgage product pricing.

“It can be confusing for clients as, the assumption might be, that this would automatically mean that mortgage rates would increase. Conversely for home owners, as base rate rises, we’re likely to see mortgage rates fall.

“This is because the overall financial picture is better than was initially thought by the financial analysts. So when my clients ask what is happening with mortgage rates, the general picture is that they are starting to come down. And, the downward trend of fixed-rate mortgages is expected to continue*.

“In fact, much has been made in the media of late about mortgage price wars. As the lenders lower rates to compete for your business**. This month, we have seen fixed term mortgage rates go back below 4%, with HSBC and Virgin being the first to reduce below 4% rates for certain fixed term deals.”

Will there be further interest rate rises this year and what will this mean for mortgage rates?

“The Bank of England has now increased interest rates 10 times in a row. But in their latest announcement, there were indications they feel that we have reached a turning point for inflation. With the hope it is flattening and will start to go down.

“Even with this, it is expected there will be at least one further interest rate rise this year. Whilst any interest rate rises are concerning for home owners, this is a better picture than had originally been predicted.”

Should I opt for a tracker mortgage instead of a fixed term deal?

 “Despite fixed rates clearly getting cheaper, many of my clients are still very interested in tracker mortgages.

“In many cases, at the moment, tracker mortgages have lower rates than fixed rate mortgages. But with tracker mortgages, the rate you pay can go up and down. So, if the Bank of England increases the base rate again, so will the amount you pay each month. However, if the base rate does peak and then starts to fall, a tracker will allow clients to take advantage of falling rates.

“On the flipside, with fixed rate mortgages, you pay the same for the duration of your mortgage term. This brings certainty to the amount you will pay each month, which many people value. Especially with uncertainty around other bills such as gas, electric and food costs.

“Much depends on your appetite to risk and what you can afford to absorb in your monthly budget. We would advise you speak to a mortgage adviser like us to fully review your circumstances and decide what is suited to your circumstances.”

“Even if mortgage rates do start to fall, they will still be higher than they were this time last year. So home owners need to brace themselves for higher mortgage rates potentially for a while to come. If your mortgage deal is coming to end, we would urge you to seek mortgage advice to ensure you are choosing the right options for you.”

Whether you’re an existing home owner or thinking to buy no doubt you might be worried about affordability right now. And we can help.

To talk more about our February Mortgage Update: What is happening with mortgage rates this month why not get in touch today for a no obligation, free conversation. We don’t charge anything up front, so by speaking to us, you are under no obligation. We are based in Salisbury, Wiltshire, but we can help you no matter where you live in the UK.

Simply call us on 01722 322683 or complete a contact us form on our website and tell us when it would be best to get back in touch with you.

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**Source :

You may have to pay an early repayment charge to your existing lender if you remortgage.


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