Good bye 0.5% Bank Rate. Hello 0.75%. What does the rise mean for your mortgage payments and how will it affect future pricing? Jeni Browne explains…
With the futures market calling a 91% probability that we would see a rise in Bank Rate, last week’s news of a rise in the base rate to 0.75% came as no real surprise. That being said, it doesn’t change the fact that it can’t have been an easy call for the MPC to make. The jobs market aside, the economy isn’t going great guns at the moment and the possibility of a no-deal Brexit – or, indeed, an early general election if the Government falls – will have made the decision harder. But what does the rise actually mean for borrowers and will it affect your monthly mortgage payments?
If you’re on a fixed rate
Anyone who has a fixed rate mortgage which is still subject to early repayment charges, can be rest assured that their monthly payments won’t have changed. However, if you’ve passed the fixed rate period, i.e. you’ve reverted to the lender’s Standard Variable Rate (SVR), you could find that your mortgage payments have increased. But this will depend on how the SVR is calculated. If you’re unsure, check your mortgage terms and conditions. (We can help you understand these if you’re unsure).
If you’re on a variable rate
The situation is a lot less favourable to those on variable rates, particularly those which track Bank Rate. These borrowers will find that their monthly mortgage payments have increased. Those with a mortgage of £150,000 can expect their payments to have gone up by about £31 per month – an extra £372 per year! As you can imagine, the knock-on effect for portfolio landlords with lots of these products could be considerable.
If your payments have gone up, why not give us a call to see if we can bring them back down? Even if you are still within the ERC period, we may be able to find you a deal which makes you better off. This service is completely free of charge and without obligation.
How will the move in Bank Rate affect future pricing?
It won’t take lenders long to nail their colours to the mast and adjust their pricing, particularly those who have spent the last year absorbing costs instead of passing them onto borrowers. In my opinion lenders will mostly probably start to increase pricing in September when every is back from their holidays but it could be sooner – we’ll certainly keep you posted.
When it does happen, shorter term fixed rates are likely to be the first to be punished. We may even see lenders hold off a little longer before adjusting five year fixed products. But sooner rather than later mortgage rates will be going up meaning you may have to expend a bit more blood, sweat and tears reworking your sums and cash flow projections.
If you want to get ahead of the game, you might want to consider these deals:
- Buy to let mortgages – 2 year fixed rates from 2.49% (5.1% APR)
- Residential mortgages – 2 year fixed rates from 1.44% (3.5% APR)
In our opinion, these are some of the very cheapest rates on the market today!
For more information on either of these rates or to see if we can save you money, give us a call on 0345 345 6788.
Alternatively you can: