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Mortgage Rates Are Starting To Rise

Why might interest rates go up?

Pressure is increasing on the Bank of England to raise interest rates due to the growing concern of rising inflation.

Rising inflation is an increase in the cost of living, and historically the BoE uses interest rates to keep inflation from spiralling out of control.

In Chancellor Rishi Sunak’s October budget, we saw that:

  • Inflation rates were higher than predicted, and are expected to peak at 4.4% in Q2 2022.
  • Unemployment rates were lower than expected, with estimates to peak at just 5.2% in Q4 2021.

Rising Inflation

What would an interest rate hike mean for mortgage rates?

When base interest rates go up, your mortgage interest rate usually follows.

"Homebuyers have been given a few more months to lock into the record low mortgage rates that have helped keep the housing market booming during the pandemic, experts have said, after the Bank of England held the base rate at 0.1%."

THE GUARDIAN - 5th November 2021

If interest rates rise, fixed-rate mortgage products could also become more expensive, as banks don’t want to lock in to low interest rates if the base rate keeps going up.

So, the longer you wait, the more you could end up paying over the term of your mortgage - even if you do get a fixed rate loan. But with the base rate remaining at 0.1% for now, you still have time to act.

Research from Kensington Mortgages suggests that “most people would be willing to pay £1,200 more a year for longer term fixed mortgage” than a short term deal.

Should you lock in to a fixed rate mortgage now?

If you’re on a tracker mortgage or you’re paying your bank’s standard variable rate (SVR), your monthly mortgage repayments could increase as soon as interest rates next go up.

With the interest rates kept at 0.1% you are ok for the time being; however, we think it’s worth considering your remortgage options and thinking about whether a fixed-rate product could protect you against future rate hikes in 2022.

If you’re already on a fixed-rate mortgage, it will depend on how long your current mortgage deal has to go.

You could face an early repayment charge (ERC) if you end your current mortgage before its term, so it makes sense to discuss your options with an independent mortgage adviser.

What kind of fixed-rate mortgage is best?

Most high-street lenders and private banks offer the following fixed terms:

  • 2 year fixed rate mortgages
  • 5 year fixed rate mortgages
  • 10 year fixed rate mortgages, and even longer terms

Kensington’s research suggests that "eight in ten people (83%) would consider a long-term fixed-rate mortgage above five years for greater certainty of mortgage repayments".

For more information on fixed rate mortgage deals click here.

How do I get a fixed rate mortgage?

To get all the options on a new or existing mortgage, speaking to a trusted mortgage broker is the hassle-free approach.

‘ are independent experts at finding the lowest cost and quickest mortgage for your circumstances’

  • We can help you decide what kind of mortgage is best for you
  • And negotiate the best fixed interest rates with lenders

And we’ll also help you through the process, every step of the way.

Complete our call back form on this page or call us on 0117 403 3464 for a no obligation discussion.

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