On 10th May 2023, The Bank of England increased the Base Rate by 0.25% to 4.5%. This is part of its strategy to get a handle on inflation and the move was widely expected, however it is the twelfth increase in a row and mortgage clients are understandably concerned, so here’s how it could impact you.
If you are on a Tracker/Variable rate mortgage
Your payments will be affected more or less straight away and you will see the difference in your payments first. If this is you, then now may be the time to review the rate you are on to see if this type of mortgage is right for you personally anymore. You may have the option to switch and fix your rate in now so that you know what you are paying going forward. Of course, some trackers offer no early repayment charges, so if you are planning on moving soon and went onto a Tracker for this reason, then this is something we would need to consider when assessing your options.
If you are on a Fixed rate
Your payments won’t be affected immediately whilst you remain on your fixed rate. However, when your interest rate ends, you may then feel the effects of the rate rises whilst you have been enjoying the rate you secured previously. It is always advisable to get advice from a whole of market adviser when your mortgage product is coming to an end, as they can see the products on offer to you if you were to stay where you are and compare that to the products available if you were to remortgage elsewhere. Many people think that staying with their existing lender is the ‘easiest’ option, however its often not the cheapest and in today’s marketplace, making sure you are not paying more than you need to is key!
If your rate is due to end in the next 6 months
Now is the time to start! You can secure a rate up to 6 months before your existing rate ends, meaning that if you fall into this category, the work can start now. If you secure a rate today and rates drop, if you have a good broker who keeps an eye on this for you, then you can change the application to take advantage of the lower rates up until the switch takes place. This means that you won’t miss out if rates drop by securing one early, however if they go up further, then you have locked in a rate at today’s prices without having the worry of them increasing.
Are there benefits to a Base Rate increase?
Yes, the idea behind increasing them as they have been doing is to curb inflation and they feel that by raising the rates, this will help the country strengthen the economy and help get a handle on inflation.
It’s also good news if you are a saver, as you could benefit from higher interest rates on your savings pot.
Some economists are expecting that we are either at the peak of the rate rises or else we are very close to it, but to see how this affects you and your own mortgage plans, speak to our advisers today who can advise you personally.
Please Note: Your home maybe repossessed if you do not keep up repayments on your mortgage or other loans secured on it.