Despite previous warning that the base rate would be increasing after the recent Bank of England’s Monetary Policy Committee meeting, many were still hopeful that a rate hike would be delayed. Alas, the committee voted unanimously to an increase of 0.25%, climbing from 0.5% to 0.75%, just months after a November 2017 increase from 0.25%.
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.
For many homeowners, the news of the rate change won’t affect their current mortgages because, as UK Finance reports, over 50% of open mortgages and 95% of new loans that were taken out last year were fixed rate mortgages.
However, for the other half of borrowers who have a tracker or SVR mortgage, now is the time to figure out exactly what type of effect the rate change will have.
Are you on a Tracker or SVR mortgage?
Tracker mortgages directly follow the BoE base rate and your mortgage requires you to pay a specified percentage above the base rate, so those interest rates will definitely go up.
The standard variable rate mortgages that many borrowers roll into after their initial terms don’t always follow the base rate, but it’s highly likely that most banks will be raising their rates in alignment.
Experts have also warned of a second rate hike before the year is out. Borrowers with tracker and SVR loans may be even more worse off if/when this comes to fruition.
So before the new rate takes effect, it would be prudent to look into the market to see what other deals, namely on fixed rate mortgages, are available.
Financial Review
The only upside to the rate increase is that interest rates for savings accounts and ISAs also usually rise and fall along with the base rate. Be on the lookout for a deal with better terms and conditions to take advantage of the momentary rate upswing.
Currently paying into your mortgage through a tracker or SVR loan and wish to secure a new deal with a fixed rate?
As financial experts with years of financial planning experience, we’re in the best position to help you find your next deal.
We can review the options and find the best mortgage product for your circumstances from the wide variety at our disposal. And once you’ve settled on a mortgage option, we’ll guide you through the process, ensuring a stress-free experience.
If you’re ready to save hundreds, possibly even thousands of pounds per year with a great new mortgage deal, we can help.
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