We give our interest rate prediction
After the Bank of England announced that the base rate would be rising last week many of our clients have been in touch to ask for our prediction on the future of interest rates. This is an interesting topic and certainly one that will affect most people over the years, especially when it comes to their mortgage decisions. I am expecting rates to rise twice within 3 years and the rate rises are likely to be 0.25% per rise. This opinion mimics that of Mark Carney’s, the Governor of the Bank of England.
What does the increase mean?
Of course, any rate rise will eventually affect your mortgage payments but a further 0.5% rate rise shouldn’t scare you unless you’ve over-committed yourself. For every £50,000
borrowed on a repayment mortgage product over a 25-year term will see monthly payments increase by around £6 for each 0.25% rise. If you are on a fixed rate, any movement in the rate won’t affect you until the product expires. This is the reason we are nearly always recommending a fixed rate to our clients.
Let’s face it, many of us knew that the super low rates couldn’t last forever and nearly all of us believed that rates only had one way to go. So, we shouldn’t be surprised by the news of the recent rise and the forecast modest rises predicted.
What can be done to help?
It does add further importance to reviewing your mortgages, particularly if you are on a variable rate or coming to the end of a fixed rate product. If you have buy to let mortgages it is time to review your situation. Mortgage products remain extremely attractive and we don’t forecast our own mortgage activity changing much over the coming years.
If you want advice or to discuss how rate rises may affect you, we are here to help – please get in touch on 01273 736536.