The Bank of England has once again raised interest rates, for the fifth time in as many months. The Bank Rate rose by 25 basis points to 1.25 per cent. Three of the nine Monetary Policy Committee members even voted for a 50-basis points hike, suggesting that rates have further to rise in the face of soaring inflation.
Borrowers on fixed-rate mortgages are protected from any rate rises. Their mortgage payments will stay the same, and with the majority of borrowers opting for fixes in recent months, many will be protected.
However, those with variable-rate deals may wish to take action. A borrower on a base-rate tracker will see their monthly rate increase by the full 25 percentage points. While those on their lender’s standard variable rate are also likely to see the full impact of the increase.
If you are in this position, and worried about the potential of future rate rises. It may be worth considering a fixed-rate mortgage. The pricing of new fixed-rate mortgages has been rising although lenders have absorbed some of the higher borrowing costs in order to remain competitive and attract new business. Fixed-rate mortgages are available from less than 3 per cent for two, three, five and ten-year deals, depending on your loan-to-value, which is still pretty competitive.
While a longer fix gives the borrower security from rising interest rates for longer. It is important not to fix for longer than you are absolutely certain about, or you may have to pay a hefty early repayment charge to get out of the mortgage early.
Contractor or Professional Mortgage
Mortgage deals can be booked up to six months before you actually need them. So with pricing only likely to increase, booking a rate now will give you peace of mind. The best way to find a new mortgage deal is to seek advice from a whole-of-market broker such as AWS Private Finance. We look at all the products on the market to find the right one for your particular circumstances.
If you are looking for a contractor or professional mortgage, we have plenty of experience in arranging such deals, knowing which lenders offer the most favorable terms. Get in touch for more information.