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What the latest interest rate rise means for your mortgage?

On 2nd February, the Bank of England increased the interest rates from 3.5% to 4%. As a result, you may be wondering what this latest interest rate rise means for your mortgage. So, our Managing Director, Adam Nanson gives his expert opinion on what this means for you.

What the latest interest rate rise means for your mortgage

What this interest rate rise means for your mortgage?

“It was no surprise that that Bank of England increased the interest rate on 2nd February. The Bank of England is keen to ease inflation by increasing the cost of borrowing and increasing the base rate is one way of doing this. But amid a cost of living crisis, many of you may be concerned that this latest rise might make mortgages more expensive.

“My main message to you is that the industry was expecting this rise. The lenders knew this was coming and, in the main part, the rate rise will already be built into their mortgage product pricing*.

“The general view from across the industry is that mortgage rates will continue to decrease even with the interest rate rise**. Some newspapers have started to talk about “price wars” between the lenders as they fight for your business. And the hope is that mortgage rates will fall below 4% in the coming weeks. Overall, it’s a more positive picture for the mortgage market than it was a few months ago.”

Will there be further interest rate rises this year?

“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 go for a fixed rate or a tracker mortgage?

“With the base rate at it’s highest level since the global crisis of 2008, most people are finding that mortgage rates are higher now than they were the last time they reviewed their mortgage.

“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 base rate increases, 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 what the interest rate rise means 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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