We have recently seen an increase in clients asking whether they should remortgage now to secure a lower rate. Inflation is rising, consistently hitting levels substantially above the 2% target the Bank of England has for it. The Bank’s Monetary Policy Committee increased the base rate to 0.5% in February 2022 and to 0.75% in March 2022. The hope is that if they make small rate rises over a period of time, it will help to “ease off the accelerator rather than apply the brakes” for the economy. This has had serious implications for the mortgage market, which will start to price in these predicted rises. We have been discussing these implications with clients over the coming months and have been encouraging clients to remortgage if they are in the position to do so.
Fixed-rate mortgages
If you have a fixed-rate mortgage then your mortgage repayments won’t be affected by the interest-rate changes. This means that you won’t benefit from rate cuts but you won’t be hit if interest rates increase. If you have a fixed-rate mortgage, we would advise you to check when your deal runs out and if there are any early repayment charges if you end the deal before the fixed term comes to an end.
Variable-rate mortgages
A variable-rate mortgage goes up and down in line with the Bank of England base rate. If you have one of these mortgages then you would have benefitted from the interest-rate cuts last year. You will need to decide if you want to remortgage. If you anticipate the interest rates increasing then it could be a good idea to fix your mortgage rate now while you can still get a competitive rate.
Will interest rates increase?
We believe at some point the interest rate will increase again. The Bank of England is now predicting that inflation will hit 8% in the coming months and the market is pricing in at least two more rate hikes in 2022. The market is predicting that the Bank of England base rate will be over 2% by February 2023 and possibly as high as 2.3% by the end of 2023.
Whichever type of mortgage you have, it might be worth considering fixing your mortgage before the Bank of England increase base rates. We would advise speaking to one of our mortgage advisers. Find out why you should use a mortgage adviser here.
In the meantime, if you have any questions about your mortgage or whether you should remortgage to secure a lower rate, then please get in touch.
*Your home may be repossessed if you do not keep up repayment on your mortgage.