Is Now the Right Time to Review Your Mortgage Rate?
On the 17th of March 2022, the Bank of England raised the base rate to 0.75%, the highest since March 2020, when Covid restrictions began.
In announcing their decision, they said “given the current tightness of the labour market, continuing signs of robust domestic cost and price pressures, and the risk that those pressures will persist, the Committee judges that an increase in Bank Rate of 0.25 percentage points is warranted."
But what does that mean if you have a mortgage?
If you are on a standard variable rate there will be an implication. This is because the amount you repay each month reflects the current base rate, so an increase in the base rate will result in an increase in your monthly repayments.
This means the average home repayments on standard variable rates will add £316.56 to your outgoings over the year.
Since the Bank of England started raising the base rate from it’s all time low of 0.1% in December 2021, the average standard variable rate mortgage repayments are now looking at an additional outgoing of £972.60 over a year (this is inclusive of the £316.56 resulting from the most recent base rate rise).
Why should you consider fixing your mortgage now?
The Bank of England is predicting that inflation will hit 8% in the coming months and is setting the expectation of at least 2 more rate increases 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.
However, recent events concerning Russia and Ukraine have shown us just how quickly a situation can change, with the Bank of England saying, “the invasion of Ukraine by Russia has led to further large increases in energy and other commodity prices including food prices.”
Bob Duncan, Managing Director of Rettie Financial Services says, “The economic climate is extremely uncertain, and this move will place homeowners under further strain. However, in the face of spiralling inflation it’s important that homeowners, who are feeling anxious about their finances, look at their options.”
With all this uncertainty, fixing your mortgage might be an option you should consider.
The benefits of fixing your mortgage
- Fixing brings certainty to your mortgage payments. You know exactly what your mortgage outgoings will be for the fixed term you agree, no matter what happens with the base rate.
- If you have a low loan to value (the size of your mortgage as a percentage of your property value) then you will almost certainly benefit from fixing, as you will have access to some of the lower fixed-interest rates available.
What you need to consider
- Are you on a tracker or variable rate mortgage? If you are then base rate increases have implications, and fixing might be to your benefit.
- Does your current mortgage have an early repayment charge if you wish to switch to another deal? You should look at this cost in relation to potential savings and take advice on the most suitable outcome for you.
- Do you need some certainty on your outgoings when other living costs are so volatile?
It is easy to assume that using a price comparison site is the best thing to do when looking to remortgage. But bear in mind:
- Many mortgage deals are only available via mortgage advisors, meaning they don’t appear on price comparison sites.
- Not everyone can get the rates quoted on price comparison sites.
- Price comparison sites don’t consider your credit rating or personal circumstances which will determine whether a lender will lend to you.
Rettie Financial Services
Don’t wait until the next base rate increase to consider your options. Our team have access to over 90 lenders and over 12,000 mortgages and are always happy to have a no obligation chat about the options that might be available to you.
Call us on 03301 759 977
Email us at firstname.lastname@example.org
Visit us to request a free financial services consultation at Financial Services | Rettie & Co.
Rettie Financial Services is a trading name of Mortgage Advice Bureau Limited and Mortgage Advice Bureau (Derby) Limited who are authorised and regulated by the Financial Conduct Authority.
Mortgage Advice Bureau Limited. Registered Office: Capital House, Pride Place, Derby DE24 8QR Registered in England number: 3368205.
Mortgage Advice Bureau (Derby) Limited. Registered Office: Capital House, Pride Place, Derby DE24 8QR Registered in England number: 6003803
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You may have to pay an early repayment charge to your existing lender if you remortgage.
Your home may be repossessed if you do not keep up repayments on your mortgage.