While this eleventh consecutive rise may be deemed as a necessary evil as the Bank of England continues to try and tame inflation, it may not be the last as indicated projections of the base rate peaking at 4.5% in the summer still look promising – with economists predicting inflation will fall to around 5% by the end of 2023.
So, despite rising concerns, there is at least some sign of hope that the markets are beginning to normalise.
To help borrowers understand the implications of the latest interest rate rise on mortgages, the team at www.onlinemortgageadvisor.co.uk have outlined how this will affect mortgage payments, new mortgage deals and advice for those already struggling to keep up with their payments.
How will it affect mortgage payments?
How the interest rate rise will affect borrowers entirely depends on the mortgage deal they’re currently on. Those on a tracker mortgage will feel the impact almost immediately – with the average deal expected to see an increase of around £24 per month following the recent BOE announcement. Those on lenders’ typical standard variable rate (SVR) will likely pay £15 extra, although the exact SVR rate will be decided by the lender.
Fixed-rate deals won’t be affected in the short term, except for those borrowers who have one coming to an end within the next six months. Anyone with a fixed-term deal that is due to expire soon, will likely find the rate they pay when they remortgage a lot higher than their current deal.
What about new mortgages?
Those looking to remortgage during this period are advised to speak to a broker as soon as possible about their options. Some lenders allow borrowers to lock in a rate for up to six months, which could protect against the expected increase to 4.5% at some point before the summer. Alternatively, borrowers could also consider signing up for a tracker deal for now and then switching to a competitive fixed-rate deal later down the line. There’s no one-size-fits-all, it really does depend on your personal circumstances.
As for the fixed rates currently on the market – they have come down in recent months and are expected to continue falling throughout the year. However, it’s important to keep in mind that average 2-year and 5-year fixed rates are around 3% higher than they were this time a year ago, so the chances of remortgaging at a better rate in 2023 are slim.
What if I’m already struggling with my payments?
If you’re struggling to keep up with your mortgage payments, there are a number of options available to you – whether that’s taking a break from monthly payments or lowering how much you need to pay. You could also consider switching to an interest-only mortgage; while this is a short-term solution, it would make your mortgage costs a smaller monthly expense. If you’re still able to pay some part of your mortgage payments, another possibility might be extending your current mortgage term to reduce your repayments.
That being said, if you’re completely unsure of what to do, your best option would be to speak directly to your lender. They are best positioned to discuss your options and, at the very least, must offer you a solution. They’ll lay out all the options available to you and advise on which path might be the most suitable for you to go down.
