With the Bank of England raising the base rate from 0.25% to 0.5%, the first increase in over a decade, it is natural that many people have been wondering what sort of impact it would have on them. Savers were hoping that lenders would respond by providing them with a more attractive rate for their savings but the majority of interest fell on mortgage rates. After all, with variable rate mortgages, mortgage holders knew that there was a chance that their monthly payments would increase if interest rates rose.
One impact of this increase is that it seems as though mortgage rates below 1% have all but been removed from the market. By mid-November, research by a few online providers could find only one lender offering a rate of below 1%. This was the Furness Building Society, which provided a two year discount rate with a 0.99% rate. Of course, by the time you read this, this may also have been removed; such is the nature of the market and the way that lenders have responded to the Bank of England change.
In November 2016, the lowest rate tracker rate mortgage you could find was 1.19% while in November 2017, it seems as though the lowest tracker rate mortgage on offer stands at 1.24%.
Find the mortgage rates that are best for you
With concerns that there will be further increase rates by 2020, something which the Bank of England have hinted at, now would be a good time for people to consider switching to a fixed rate mortgage if it was possible. It’s not always possible to get out of your existing mortgage without a lot of hassle and payments, but if you can, it is worth considering. It is not to say that moving to a fixed rate mortgage will make you better off but with concerns about increases, it may be that the consistency of this style of mortgage will appeal to homeowners.
Then again, it looks as though many affordable fixed rate mortgages, discount rates and cheaper tracker rates have been removed. Given that many people predicted that the Bank of England were gearing up to increase interest rates, financial institutions had plenty of time to consider their options and what action they should take as and when the situation changed.
Small amounts of money soon add up
If you have done your own calculations on what the changes to your mortgage rates mean for you, well done and if you haven’t, it is time that you do so. However, if you have done so and think that you can handle the increased payment, bear a couple of things in mind. It is expected that the average rise in payments per month will range between £15 and £25, which by itself may not seem too bad. However, you’ll probably find that many of your other monthly bills start to creep upwards too and of course, with further interest rate rises likely, that £15 to £25 extra a month may become an extra £40 to £50 per month before too long.
There will be some people who are already at their limit when it comes to meeting their mortgage payments, and these people need to recalculate their finances and make sure they are able to meet all of their monthly bills. However, the recent increase, and subsequent rise in mortgage rates, should serve as a good reminder for everyone to keep tabs on their finances and ensure they have the best possible deal for their finances.
If you would like guidance about mortgage options or the London property market, get in touch with Regent Property.