BASE RATE RISE-MORTGAGES

December 6, 2017 by in category Mortgage News with 0 and 0

The first base rate increase in 10 years. The Bank of England announced that it would be increasing the base rate to 0.5%, after a vote of 7-2 in favour of a rate rise. This decision follows much speculation amongst market commentators of a rate rise, after Mark Carney commented, in October, that the majority of the Monetary Policy Committee saw a rate rise as appropriate.2

The reason for the rise?
The UK economy has weathered the Brexit storm better than expected.2 Inflation hit three per cent in September – its highest level in more than five years3. The policy dilemma which faced Britain’s central bank, and influenced today’s decision, was how to balance surging inflation against an economic slowdown, post UK referendum4. The base rate was increased with the aim of counteracting rising inflation safeguarding the UK economy. Carney hopes that increasing the base rate will also protect consumers and reduce risky mortgage debt.5

What will be the affect on your mortgage?
As you may have read in our previous Best Buy email, we have already seen some of the most significant mortgage lenders in the UK raise their mortgage interest rates. UK lenders including Barclays, NatWest, Nationwide, Halifax and a handful of other banks and building societies, have upped their rates in line with climbing swap rates, ahead of the base rate rise.

Tracker mortgages – For anyone with a base rate tracker mortgage, your monthly mortgage repayments will rise as of next month.
Variable rate mortgages – We may see rates start to fall, despite the rise in the base rate, as lenders may become less risk-averse with a higher base rate to fall back on.

Fixed rate mortgages – In the short term, those on a fixed rate mortgage can be safe in the knowledge that their monthly mortgage repayments will remain unaffected. Once the initial period has come to an end, however, higher mortgage rates may apply.
Savers – With a base rate rise, you will see interest on your savings increase.

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THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

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