The Bank of England’s Monetary Policy Committee today opted to hold the base rate at a record low 0.1%. But with financial markets signalling there may be as many as two rate hikes in 2022, now is a good time to revisit your finances to ensure you’re not paying over the odds.
Policy makers at the Bank of England may have opted to hold the base rate at a record low 0.1%, but lenders are already raising rates on their best products.
Lenders often raise mortgage rates in anticipation of changes in central bank policy in order to position themselves ahead of time. That’s why we’ve seen many high street lenders withdraw their best deals in the past fortnight.
For borrowers, there’s no reason to panic. Any move in the Bank of England’s base rate is likely to be relatively small and we’re unlikely to see huge swings in mortgage rates in the short term. However, it is clear mortgage costs are now moving in an upwards trajectory and could climb significantly over the coming months.
Whatever your situation, you likely have options that will enable you to either offset or circumvent rising mortgage costs. Here, we outline our top five things to consider:
- Get in touch with a broker that covers the entire market
Mortgage brokers are in constant contact with lenders and are often first to hear about attractive deals. Each lender has a different lending criteria and a broker can quickly match you with the right one, often saving you money in the process. Knight Frank Finance covers the whole market, so you always have access to the most competitive deals available.
- Be quick, even if you aren’t moving or remortgaging for months
Most mortgage offers are valid for six months. Even if you don’t need finance immediately, it’s wise to lock in a deal before interest rates start rising. Lenders warn mortgage brokers before they increase the price of their products, but only by about 24 hours, so it is a good idea to check what’s available.
- You have options, even if you are locked into a deal
If you are locked into a deal and are worried about where rates will be when your deal ends, don’t worry – you have options. Your broker may be able to work with you to extend the length of your mortgage, or perhaps you can make the most of current low rates to make overpayments and reduce the amount left to pay, ready for when it is time to refinance. Whatever your situation, it’s likely you have options you might not have considered.
- Is it time to borrow to invest?
Many homeowners opt to borrow while rates are ultra-low in order to invest in their homes, such as an extension or renovation. This ensures your money goes further, but it can also increase the value of your home relative to the debt. A lower loan-to-value when it’s time to remortgage means a lower rate and potentially a significant decrease in monthly outgoings.
- Specialist mortgage rates are on the rise too
Some products, most notably Lifetime Mortgages, are correlated with Gilt yields, rather than the Bank of England base rate, so costs often climb in tandem with an economic recovery. Gilt yields have been climbing in recent weeks and David Forsdyke, later life finance expert at Knight Frank Finance, forecasts headline rates will hit 3% before the end of the year.
If you, a family member or friend is looking to buy a property or remortgage this year, speak to us. We know all the major lenders in the marketplace and can help find the most cost-effective and suitable mortgage for you.