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Will interest rates keep rising? Here’s what you need to know, and what the figures may mean for your mortgage.

Published: 03/11/2022 By Alex Parish

The Bank of England base rate hit a 14-year high in September of 2.25%, The announcement on Thursday November 3rd has seen further increase to 3%. We explain how this might impact your mortgage deal or house purchase – and how we can help.


In September, the Bank of England raised the base rate to 2.25% (an increase up from 1.75%), and many mortgage and savings rates changed by a similar amount. The latest 0.75% increase has now set the biggest rates rise in three decades. Current predictions are that interest rates will peak at 4.66%, on a positive this is much lower than the 6.25% predicted when the mini budget first hit. The Bank of England’s monetary policy committee meet some 8 times a year (to discuss increasing or decreasing interest rates). The next meeting is the 15th December and thereon the 2nd February.


Adjustments to the Bank of England base rate are used to control inflation and stop prices rising too quickly. The current goal is to keep inflation as close to 2% as possible. The, Bank of England Governor Andrew Bailey said the Bank would “not hesitate to raise interest rates to meet the inflation target”.

 
Fixed-rate mortgages - 


If you have a fixed-rate mortgage, you may not be affected by this latest rise. However, if you are thinking about re-mortgaging when your fixed-rate period ends, you may find there are fewer options available. The base rate rise and the late September mini budget prompted mortgage providers to raise rates and withdraw products. Happily, research from moneyfacts.co.uk (17th October) indicates that the home loans market is steadying. Average rates for two- and five-year fixed-rate mortgages are stabilising, and the number of available mortgage deals is rising again.

 
You can finalise a new fixed-rate deal up to six months in advance of the end of your current package, so it’s worth acting now in case rates rise further in November, as suggested. 


Variable-rate mortgages- 


If you have a variable rate mortgage, you may already be facing higher monthly repayments, a potentially stressful situation as other day-to-day costs are also rising. Our professional colleagues at Mortgage Advice Bureau may be able to advise – give us a call today and we can connect you.

 
Stamp Duty - 


One element of the controversial mini budget that has survived is the stamp duty cut: no stamp duty is paid on the first £250,000 of a property, and first-time buyers don’t pay stamp duty on property valued at up to £425,000.


 
For those with a mortgage it is especially important to be aware of when your mortgage term ends, if you are looking at mortgaging in the next 6 months, then now is the time to secure a new deal. A lot of lenders will allow you to hold a mortgage agreed in principle (AIP) for up to 6 months, so our advice would be to explore mortgage options now. It is anticipated that there will be further rate rises, if you can agree a new mortgage product now before the next rates rise you will be in a better position having potentially secured a more favourable product to what maybe available in the next 3 to 6 months’ time.

Treat mortgage advise as you would for having your property valued, always get 3 opinions, don’t just rely on the advice of one mortgage broker. In our experience you can give the same criteria to several mortgage advisers and receive different opinions. Compare the market place thoroughly!