On 15 December, it was announced the interest rates would rise by 0.5% to 3.5%; this is the highest level since 2008 and the ninth time that the Monetary Policy Committee (MPC) has increased the bank rate to tackle rising inflation.
In the UK today, there are around 850,000 people with a tracker mortgage and 1.1 million on the lender’s standard variable rate. Tracker rates move in line with the Bank of England Base Rate and the lenders set Standard Variable Rates.
This latest raise adds approximately £60 per month to the repayments for people with a £200,000 variable rate mortgage, and since December last year, it’s gone up by around £380 per month. However, despite this rate rise, there is some good news as the increase was lower than the November rate rise of 0.75%.
The MPC put up borrowing costs to try and bring inflation down. In November, the rate stood at 10.7%, which was down on the October figure of 11.1%, so the likelihood is that it has peaked.
The predictions from economists are that the rate will be between 4% to 4.25% next year, which is lower than the previous figure of 5% anticipated, and inflation will fall rapidly from next summer. Although the rate has gone up again, the good news is that fixed-rate mortgages have come down by 0.5%- 1% due to the reductions in the cost of government borrowing. This affects the rate at which lenders borrow for their fixed-rate mortgages. This is due to reductions in the cost of government borrowing – which influences the rate at which lenders borrow money for fixed-rate mortgages.
If you’re currently on a fixed-rate mortgage, you don’t need to do anything, and your repayments won’t change. If your deal is due to end by June, it’s worth securing it now, as some lenders enable you to book a new rate six months before your existing deal ends.
Mortgage rates are changing constantly so here at the mortgage hub we would secure a new deal and continue to review your options until the new deal is due to start to ensure you have the very best option available to you.
If you’re on a lenders standard variable rate, there are options to secure a lower rate that is still variable and would have no penalties to leave. This ensures you’re on a lower rate for now while monitoring the fixed rate options.
If you would like to discuss the mortgage market and your circumstances with a team member, please don’t hesitate to get in touch.