On 4th August, the Bank of England announced interest rates would rise by 0.5% to 1.75%. This is the largest increase in 27 years. The decision was taken to try and curb the sharp hike in inflation, which stood at 9.4% in the 12 months to June 2022. With predictions this could rise to as high as 13% by October, further increases to the base rate are likely to follow in the coming months.
What does this mean for mortgage rates?
Following this rate rise, many of the lenders and banks increased their rates for customers immediately, which affected anyone on a variable mortgage rate. Those on tracker mortgages, that follow the base rate, will also see an increase in their payments now.
Those on fixed rates are insulated from this rise for the moment. Currently, more than 80% of mortgages are on fixed-rate deals, so the impact will be limited for many people now.
Mortgage rates already on the rise
Even before this latest rise, mortgage rates had begun to creep up. According to financial specialists Moneyfacts, the average cost of a two-year fixed rate mortgage has gone up from 2.59% last June to 3.25% now. The average cost of a five-year deal has gone up from 2.82% a year ago to 3.37%. Independent research organisation Capital Economics have forecast the sharpest rise in mortgage rates since 1990.
Given the current situation, it’s important that people are aware of the terms of their mortgage and the state of their current deal. Being prepared and looking ahead will be vital in securing the best possible rate, protecting themselves from payment hikes, which is especially important given that the cost of living is increasing so rapidly.
Henry Knight, Managing Director of mortgage brokers Springtide Capital, said forward planning is essential to get the best deal:
“When the Bank of England Monetary Policy Committee next meets on 15th September, all the indications are that base rates are likely to rise again and possibly by a larger margin than previously experienced. Lenders will react to this and adjust their products accordingly. It is our role to work with lenders and encourage them to stay as competitive as possible in the current climate. We’ll be flagging this with our clients to help them secure the best possible deal. It is possible to secure rates up to six months before the end of a current plan. We urge anyone coming to the end of their current deal to start talking to a broker at least seven months prior to that deal finishing. Acting early and decisively will be hugely beneficial and could save them a significant sum of money.”
At Springtide Capital we offer a personal service and are here to help every client find the best possible deal at the best possible rates. Speak to one of our friendly and experienced advisers today.
To discuss your mortgage requirements today contact Springtide Capital on 020 8154 7280.