03/11/2022
The Bank of England Raises Interest Rates to 3.00%
How to prepare for further interest rate rises.
Today, the Bank of England has announced that they are increasing the base rate to 3.00%, which represents the largest single interest rate rise in 33 years, with a possibility that this may increase further in the coming months.
Interest rates can have an impact on a wide range of areas including mortgages, borrowing, pensions and savings. The Bank of England is increasing the base rate to try and tackle rising inflation (cost of living) which has been attributed to increasing energy costs, higher prices of goods coming from abroad, a buoyant job market and businesses charging more for their products. It is likely that the Bank of England could increase the base rate further to try and meet their inflation target of 2%.
Some steps you can take to help to manage further interest rate rises on your mortgage
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 us to discuss your individual needs and circumstances before taking any further action, to help and see what could be the most suitable option for you.
1. Find out what type of mortgage you have
How you’ll be affected by an interest rate rise depends on what mortgage you’re on and when your deal comes to an end. If you don’t know, check your paperwork or get in touch with us to discuss your existing mortgage arrangement.
The good news is that if your mortgage is on a fixed rate, your monthly repayments are unaffected. Those with fixed rate mortgages are likely to be affected once they reach the end of their current deal. An interest rate rise could make remortgaging more expensive.
If you have a variable rate tracker mortgage that is linked to the Bank of England base rate, you are likely to see an immediate impact on the amount you repay. Those on a standard variable rate (SVR) could see an increase which is decided by the lender. If you are unsure, it is worth checking your mortgage terms and conditions in your mortgage offer document.
If you are on your lender’s SVR, please ensure that you get in touch with us as you could be paying more than you need to be.
For those readers who are still on a variable rate or are coming to the end of their fixed rate period, now is a good time to seek professional mortgage advice and let us talk you through the options available to suit your circumstances.
2. Put yourself in the best possible position
Once you understand the type of mortgage you have, the first step is to work out what you can afford and a good way to do this is to create a budget which can help highlight any areas where you may need to cut your expenditure and identify savings opportunities. Tactics such as building your credit score could help you get a better deal when it comes to securing your next mortgage.
3. Take Mortgage Advice
Depending on your circumstances, there can be measures you can take. One of your options could include switching 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.
However it is worth noting that fixing the rate for a longer term, may mean that you’re not able to benefit in any rate decreases in the future.
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 early repayment charges.
If you’re looking to remortgage within the next six months, it could be a good idea to start looking now. Lots of lenders’ offers are valid for six months. So, it might be a good option to lock one in now, if this is right for you and your circumstances.
If you are on your lender's standard variable rate (SVR), don't hesitate to get in touch with us as soon as possible. Depending on your circumstances, it could be that you are paying more than you need to be.
4. 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. But if you need any further advice or support, then don't hesitate to speak to us for guidance.
We will help to assess your current circumstances and search across thousands of products for the most suitable deals that are most applicable to your individual needs.
A mortgage is secured on your property, so your home may be repossessed if you do not keep up repayments on your mortgage.
There may be a fee payable for mortgage advice.
Sources:
1. The Independent. 2022. Interest rates UK – Bank of England expected to confirm biggest rise in 33 years [online] Available at: https://www.independent.co.uk/news/uk/home-news/interest-rate-uk-bank-england-base-b2216398.html [Accessed 03 November 2022].
2. The Bank of England. 2022. Why have interest rates gone up? [online] Bankofengland.co.uk. Available at: https://www.bankofengland.co.uk/knowledgebank/why-are-interest-rates-in-the-uk-going-up [Accessed 03 November 2022].
All the information in this article is correct as of the publish date 3rd November 2022. The opinions expressed in this publication are those of the authors. The information provided in this article, including text, graphics and images does not, and is not intended to, substitute advice; instead, all information, content and materials available in this article are for general informational purposes only. Information in this article may not constitute the most up-to-date legal or other information.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
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