The widely anticipated rate rise became a reality on 2nd November, with the Bank of England’s Monetary Policy Committee confirming that it has increased the interest rate by 0.25% to 0.5%. This is the first rate rise for a decade and will be the first time that many borrowers will see an increase in their rates. In this article we discuss what this means for homeowners.
This article does not constitute advice. Professional advice should be taken prior to acting on any part of it. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.
Fixed rate mortgages
The vast majority of new mortgages have been arranged on a fixed rate basis. If you are on a fixed rate mortgage, this means that nothing will change until you reach the end of your current deal.
However, if you are looking for a new fixed rate mortgage you can expect to see a rate increase.
If you are doctor or dentist who is a first-time buyer, the key to getting a better deal is to put down a bigger deposit. Alternatively, if you are looking to remortgage the more equity you have in the property, the more favourable the interest rate will be.
Tracker rate mortgages
This type of mortgage is less popular than it once was. With a tracker mortgage you pay a specified percentage above the Bank of England’s base rate. For instance, your tracker rate may specify that you 2.0% above the base rate. This means you will now pay 2.50% instead of 2.25%.
Standard Variable Rate mortgages
For the millions of borrowers who are on a Standard Variable Rate (SVR) they can expect to see a slight increase. Nationwide predicts that there are nearly 5 million homeowners on a variable rate mortgage.
The majority of these homeowners were moved onto a variable rate mortgage after their fixed rate deal ended and have been unable to move from it since. This is because they have been unable to remortgage, because they don’t have enough equity in the property or because they don’t meet the lenders requirements.
When will rates go up?
Some lenders announced that they would increasing their rates, minutes after Mark Carney announced that the rate increase.
The Telegraph details when mortgage lenders will be increasing their rates. We’ve included details of the main lenders in the table below:
Lender | Date due |
Lloyds | Tracker rate will increase on 1st December. No details are available on SVR rate. |
Nationwide | Tracker and SVR rates will increase on 1st December. |
Santander | All tracker rates will increase in line with the Banks of England’s rate rise at the beginning of December. |
HSBC | Tracker rates increased by 0.25% on 2nd November. |
Barclays | Tracker mortgage rates will increase by 0.25% on 1st December. |
TSB | Variable mortgages rates will go up by 0.25% on 1st December. |
Source: The Telegraph
Some lenders may choose not to pass the rate onto their borrowers. However, we expect to see those lenders who haven’t already increased their rates, do so shortly.
What to do next
This is the first rate rise for 10 years and it is the start of the rate rise. Mark Carney himself has said that we may see a further two rises over the next two to three years. If you haven’t done so already, now is the time to check to see if you can move onto a better deal.
Need to discuss your mortgage position?
If you are concerned or confused about the rate rise and what it means for you, your home and your financial position, contact our specialist mortgage broker, Chris.
Tel: 01403 780 770