On November 2nd, the Bank of England (BoE) announced that the base rate was to double from 0.25% to 0.5%.
This is potentially good news for savers, who may see an increase in their interest rates, although getting a real above-inflation return is impossible. But, for homeowners on a variable rate or tracker mortgage, the rate hike is likely to cause an increase in monthly repayments.
Effect on variable rate products
There are an estimated four million people in the UK with a variable rate mortgage, and a further 1.4 million with tracker mortgage products (source: Council of Mortgage Lenders).
Variable rate products have flexible interest rates, which rise and fall in line with changes to interest rates. The BoE interest rate rise means that everybody with a variable and tracker mortgage will pay more.
Fixed-rate products are not entirely safe
For those people who recently took out a fixed-rate mortgage, the interest rates on repayments will be safe from the recent interest rate rise.
However, there are 4.2 million borrowers whose fixed-rate deals are due to end within the next 12 months. These people are likely to find themselves in a marketplace where higher rates are the norm, due to potential further base rate increases.
Taking action
For people with variable rate and tracker products, as well as those who have fixed-rate periods that are close to ending, they need to start considering the options.
As independent mortgage advisers, we can help you to review your current mortgage and compare it against fixed-rate products on the market, to see if a better deal is available.
It is important to ensure that you are keeping your repayments low, saving money and taking steps to insulate against future interest rate changes.
Not only could you be saving money month-to-month right now, but with interest rates set to rise even further in the next few years, can you afford to see your monthly repayments continue to rise?
By switching to a fixed-rate mortgage before the next base rate increase, you can be safe in the knowledge that further BoE rises will not affect your monthly budget.
For more information on mortgages, rate rises and how to safeguard your money from future increases, feel free to get in touch with us on 0800 612 8099.