On the 2nd November 2017, the Bank of England confirmed that it was increasing its base rate from 0.25% to 0.5% — the first time the UK has seen a rise in interest for a decade.
There has been a lot of coverage in the news and online about this announcement, and you may have found yourself wondering how the interest rate rise will affect your own mortgage and related finances. To help you out, we’ve put together a quick guide to who will be affected and how. Read on to find out more.
If you have a mortgage, the base rate rise could mean that your monthly repayments are set to go up. Around 57% of UK homeowners are on a fixed-rate contract, according to statistics from the Bank of England, which sees their rate frozen in place for the duration, but the remaining 43% who aren’t can expect to see increased repayments.
Standard variable, tracker, and discount rate mortgages will all be affected by the hike, so it’s important that you take this into account for any financial planning you are carrying out in the near future. You should check with your mortgage provider to see exactly when they will be increasing their rates, though they will contact you in the near future as specified by the Financial Conduct Authority rules Should you be coming to the end of a fixed-term period, you’re likely to be affected soon, either when you’re switched to a standard variable rate or when you find a new mortgage deal.
If you are going to be affected by the increased rate or you’re coming to the end of your fixed rate period, we recommend you take advice from a reputable advisor as soon as possible. There are plenty of options available to you, including remortgaging to find the best deal. The Mortgage Genie can certainly help you with this to ensure you’re in the strongest position possible.
Should you be in the process of applying for a mortgage, the lender you’ve begun your application with should honour any previously agreed mortgage rates. If you’ve just started looking at the housing market, any mortgage application you make now will likely be affected by the base rate increase.
If you’re still sizing up the housing market, you might be worried that the base rate increase will influence prices. While rate rises tend to knock confidence in the property market, you shouldn’t expect to see too much movement in home values. This is because the Bank of England’s announcement has been long expected, so it hasn’t had the shock and awe effect that can sometimes take place.
The mortgage market and products are still attractive to buyers, so you shouldn’t let this news put you off your property search. Should you need extra advice, get in touch with our first-time buyer team who will be more than happy to talk you through the process of finding the best mortgage.
Landlords will probably feel the impact of this base rate rise more than any other property owner. The majority of buy-to-let mortgages are interest-only, so the increase will have a magnified effect when compared to regular homeowners who have repayment mortgages.
When you couple the interest rate rise with the recent changes in stamp duty and taxation, landlords are likely to feel pinched in the coming months. Here at The Mortgage Genie, we’re well-versed in finding the best mortgages for buy-to-let landlords, so we can help you explore your options and find the best way forward with the new interest rate increase.
While the Bank of England’s rate increase will drive up mortgage repayments, the news is very good for savers. Like mortgages, savings accounts are also linked to the base rate, except the increase will see people’s account earning more interest. Though banks and building societies are traditionally slow to pass on the benefits to savers, numerous big-name organisations have already announced plans to share the positive effect early with their customers.
So, the base rate increase has given a lot of us food for thought, but it’s something that can be well managed if you plan well and manage your finances. The Mortgage Genie is always on hand to deliver great comprehensive mortgage advice, so don’t hesitate to get in touch with our team or give us a call on 033 33 44 33 72.
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