Back in 1990, mortgage interest rates peaked at an eye-watering 15.4%. Compare that with today’s rates, some as low as c.1%, and it’s not difficult to appreciate that home-owners have had it pretty good over the last 10 years. But, in the words of Bob Dylan, the times, they are a-changing…
In November, the base rate which is set by the Bank of England crept back up to 0.5%, from an all-time low of 0.25%. Whilst this might not be much of a climb, it does show that Brexit, a weak government and the uncertain economic climate are beginning to effect a change in the direction of interest rates generally.
No one knows if or when the base rate will rise again but a rise is definitely more clearly on the horizon that previously. And when base rate rises, so do mortgage rates – pretty much immediately.
But is it worth getting a 5-year fixed rate now or should you wait a little longer? Only you can decide but some 5-year fixed rate mortgage products have already been repriced upwards and consider this:
Currently, there is a great 5-year fixed rate available at 1.79% (3.27% APRC) to 60% LTV with a £999 fee. A mortgage on borrowing of £200k at this rate for the first five years will cost you £131 per month more than if you were on a variable rate closer to 1%.
However, base rate only needs to creep up by 0.25% another three times to get to the same level as the 5-year fixed rates and in my opinion, this will happen well within the next five years meaning you could end up paying more for your mortgage in the long run.
Never under-estimate peace of mind – I was on a low SVR tracker which I loved during the long period when base rate was 0.25%. However, when it climbed back to 0.5% I suddenly realised just how vulnerable I was – my monthly payments rose immediately. So, I remortgaged onto a 5-year fixed rate and now I’m happy. Yes, I am currently paying a little more each month but the amount doesn’t change which helps me budget and stops me worrying for the next five years!
If you would like to discuss your current mortgage arrangements to see whether you could fix for the longer term or get a better deal, you can chat on the phone or arrange a meeting. All initial advice is free of charge and without obligation, so you’ve nothing to lose and everything to gain!
Beckie Pepperrell has left Mortgages for Business for pastures new. For more information or for any questions relating to this blog, please contact the Residential Team on 0345 345 6788, where one of our consultant mortgage brokers will be happy to assist.
ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.