On September 21st, the Bank of England raised the base rate to 2.25% which in turn has increased mortgage rates. The Bank of England may continue to increase interest rates in a bid to stem surging inflation to reach its target of 2%. The continued rises are unsettling both first-time buyers and those remortgaging, with mortgage deals being removed from the market at a pace.
How do base rate increases affect my mortgage?
The amount a rise in the base rate of interest will cost you will depend on what type of mortgage you have.
A Tracker mortgage: an increase to the base rate means your monthly mortgage payments will increase.
A Standard Variable Rate mortgage: your lender decides how much, if any, of the increase they would pass on.
A Fixed Rate mortgage: you will only see a change in your repayments when your fixed term ends. If your fixed-rate deal is coming to an end soon, you ought to plan ahead, as acting quickly to secure rates is advised as rates could be pulled and replaced with new higher rates at any time.
What can I do?
Firstly, don’t panic. Lenders are keen not to be caught out by a sudden rate rise and so are taking a cautious approach, lenders still want to lend and they have the money to do so.
Henry Knight, Managing Director of Springtide Capital commented:
“Given the current ongoing situation, it’s vital that people are aware of the terms of their mortgage and the details of their current deal. This is especially important given that the cost of living is increasing so rapidly and may play a part in meeting mortgage payments. Being prepared and looking ahead will be vital in securing the best possible rate and protecting from payment increases.”
If you are a first-time buyer, it is clearly a very challenging time. One of the key things, particularly for first-time buyers is to make sure that your credit record and your finances are in as good a state as possible. Be in a position to supply all the requested supporting documentation for your mortgage application as quickly as possible.
The benefits of choosing a mortgage broker
Brokers will play an integral part in helping buyers through the technicalities and financials of their mortgage process, beyond simply accessing products. In a quickly changing market they are best placed to keep up with product variations and will be in close contact with lenders. By contacting a mortgage broker early, you can explore your options and potentially lock in a more favourable rate before future increases. Over the coming months, both lenders and brokers will be dealing with high volumes of business as economic uncertainty is set to continue.
Henry Knight comments: ‘It is a complicated time in the mortgage market and the place for advice has never been more vital. The role of the adviser has never been so important, and as always, regulated financial advice will help individuals make an informed choice. At Springtide Capital we are with you every step of the way.”
With many variables to consider, whether you’re a first-time buyer or experienced property owner speak to one of our experienced, friendly advisers today to discover the right option for you.
Contact Springtide Capital on 020 8154 7280.
Sources:
Bank Rate increased to 2.25% – September 2022 | Bank of England
About mortgages | Springtide Capital