It is said that the current mood music in the financial sector is largo; slow and steady. The Governor of the Bank of England, Mark Carney, has consistently warned of future interest rates rises. The first in over a decade at one quarter of a percent came in November 2017 and it’s hotly anticipated the next will arrive during the first half of this year. If interest rate increases are indeed largo, what does this mean for those on variable rates or whose fixed-term is almost at an end?
In the simplest of terms, this means that interest rates are slowly and steadily going to increase for the foreseeable future. This doesn’t mean that rates will increase by a significant amount per jump, the next rise is anticipated to again, be just one quarter of a percent. But for those on variable rates or with a mortgage that is due for renewal in the short term, if they do not act quickly and secure a fixed term at the current rates, they will almost undoubtedly end up with a more expensive mortgage.
The situation is a little like looking for holiday flights. The cost never comes down and flights only ever get dearer yet often we delay in making the purchase and end up paying more. The same can be said of the lending market right now.
If borrowers wait for interest rates to rise again, and then take out a fixed mortgage, they’ll be locked into that rate for 2, 3, 5 or even 10 years. Whilst this is better than waiting for a subsequent rise in interest rates, the overwhelming likelihood of steady increases in the coming years really means that re-mortgagers should act now.
We’ve been asked in the past why we worry when interest rates are still very low compared to the 15% rates of the early 80s. Well, small amounts can add up! A 1% increase in interest rates could add an additional £930 per year to the average mortgage.*
So, if the mood music indicates interest rate rises, those seeking to re-mortgage should do so now. Mark Carney was once referred to as The Unreliable Boyfriend, but he’s since proved his metal as a boyfriend. Will he make good his credentials as a conductor?
For a no obligation discussion about your re-mortgage, please call a member of the Mortgage Search Go team on 0844 69 333 60 or click here to contact us.
*www.guardian.co.uk/business accessed 26th February 2018
Please note: Your home may be repossessed if you do not keep up with repayments on your mortgage.