The Bank of England has raised the base interest rate to 1.25%. In general, the current cost of living crisis has added some uncertainty to the economic environment, and we cannot rule out further rate increases. Although those currently on a fixed-rate mortgage will feel relieved, the simple truth is that as inflation rises and continues to go up, everyone with a mortgage could eventually be affected.
Although there is no certainty about how much interest rates will rise, the Bank of England will inevitably continue to raise interest rates to help address the increasing cost of living, which would increase your mortgage repayments1. With increases in fuel costs and the price of a weekly food shop2, we’re sure you won’t want to be paying more for your mortgage than you need to be.
What measures can you take?
We’d suggest putting yourself in the best possible position and ensuring that you are prepared for future rate rises by acting now, which could potentially help soften the impact. Every person has different circumstances, so we strongly recommend you look at the terms of your mortgage and contact your mortgage adviser to discuss your individual needs and circumstances before taking any further action, to see what would be the right option for you.
Depending on your circumstances, there can be measures you can take. It could be that the most apparent course of action is to switch to a fixed-rate mortgage, or if the term of your fixed rate is due to end shortly, you could consider fixing your mortgage rate for a longer period of time.
If you fix your mortgage for a longer time period, for example, 5, 10 years or more, then this could give protection for potential interest rate rises over a longer period of time.
Whether this is right for you will depend on your circumstances, bear in mind that other deals may come on to the market in the next couple of years and you may not be able to switch to them without incurring hefty charges.
If you’re looking to remortgage within the next six months, it’s a good idea to start looking now. Lots of lenders’ offers are valid for six months. So, if you lock one in now, you’re protecting yourself in case the most suitable deals disappear.
If you are on your lender’s standard variable rate (SVR), don’t hesitate to get in touch with us as soon as possible, as it means that you could be paying much more than you need to be.
Arrange a review
As your mortgage adviser, the key message is to act now to help avoid an unwelcome surprise. You will likely be contacted by your current lender offering advice or other intermediaries too. We would recommend speaking to us first. We will assess your current circumstances and search across thousands of products for the most suitable deals that are most applicable to your individual mortgage and protection needs.
Adams, G. (2022) Sunak expects interest rate to hit 2.5%. Available at: https://www.mortgagestrategy.co.uk/news/sunak-expects-interest-rate-to-hit-2-5/ (Accessed on 16th Jun 2022)
Inman, P. (2022) As food and fuel costs rise, there is no doubt the poorest are hardest hit. Available at: https://www.theguardian.com/business/nils-pratley-on-finance/2022/may/30/as-food-and-fuel-costs-rise-there-is-no-doubt-the-poorest-are-hardest-hit (Accessed 16th Jun 2022)