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- The Scramble for Remortgage Applications Remains High Before Base Rate Rises in 2012
The Scramble for Remortgage Applications Remains High Before Base Rate Rises in 2012
- By Howard Ogollegos
- Published 10/20/2011
- Real Estate
- Unrated
The Bank of England's base rate is presently at a historic low of 0.5% and has been at this low figure since summer '09. It has been thought by a majority of insiders and commentators that the Monetary Policy Committee of the Bank will start to increase the base rate in the last quarter of 2011. On 11th May, Mervyn King, Governor of the Bank of England said, "Bank rates cannot stay at this level indefinitely and at some point it will return to more normal levels."
The Bank of England's decision to leave rates well alone in the first quarter of the year were down to figures showing that the recovery of the UK financial markets was sluggish and the increase would have slowed it further.
What Does This Mean for Mortgage Borrowers? For anyone with a tracker or discounted variable rate mortgage, possible increases in interest rates are a worry. Whilst variable rates are controlled by mortgage lenders, they are normally increased as and when the Bank of England increases the Base rate. So, changes to the Base rate are likely to result in higher variable rate mortgages.
Any increase in the cost of borrowing will clearly affect borrowers and their finances, especially if they have this kind of mortgage product. The increase in repayments is likely to come as a shock, particularly as homeowners have been benefiting from historically low rates for an unprecedented period of time.
An increase in the Base rate of just 0.5 per cent (to 1 per cent) would result in a GBP 62 increase on a GBP 150,000
'interest only' mortgage. With inflation over 4 per cent and the cost of many other essential purchases rising sharply, finding an extra GBP 750 a year to repay their mortgage could be tough for thousands of households.
Rising interest rates are not a minor problem. Estimates suggest that almost two thirds of borrowers in the UK have a variable or tracker rate mortgage, meaning the majority of homeowners could be affected by a rate rise. So, it's no surprise that increasing numbers of people are researching the best remortgage deals.
Figures Show Many Now Remortgaging to Hedge Against Interest Rate Hikes: An organisation called the Council of Mortgage Lenders, who represent almost all mortgage lenders in Britain confirmed that remortgage figures had increased by almost a fifth in the first quarter of this year following the announcements by the Bank of England.
A spokesperson said that they believe the news that interest rates are going to increase later in the year is the reason for the sudden increase in remortgaging.
Fixed rates have been particularly popular with homeowners looking to remortgage. With an estimated eight million households at risk from increased mortgage payments, borrowers have been turning to fixed rate remortgage deals to protect themselves against interest rate hikes.
Fixed rate contracts have a set interest rate for an initial period, and during this time, the monthly repayments will remain level and not increase regardless of what the Bank of England base rate is doing. Of course this offers financial security as borrowers will know exactly how much to budget every month.
The Bank of England's decision to leave rates well alone in the first quarter of the year were down to figures showing that the recovery of the UK financial markets was sluggish and the increase would have slowed it further.
What Does This Mean for Mortgage Borrowers? For anyone with a tracker or discounted variable rate mortgage, possible increases in interest rates are a worry. Whilst variable rates are controlled by mortgage lenders, they are normally increased as and when the Bank of England increases the Base rate. So, changes to the Base rate are likely to result in higher variable rate mortgages.
Any increase in the cost of borrowing will clearly affect borrowers and their finances, especially if they have this kind of mortgage product. The increase in repayments is likely to come as a shock, particularly as homeowners have been benefiting from historically low rates for an unprecedented period of time.
An increase in the Base rate of just 0.5 per cent (to 1 per cent) would result in a GBP 62 increase on a GBP 150,000
Rising interest rates are not a minor problem. Estimates suggest that almost two thirds of borrowers in the UK have a variable or tracker rate mortgage, meaning the majority of homeowners could be affected by a rate rise. So, it's no surprise that increasing numbers of people are researching the best remortgage deals.
Figures Show Many Now Remortgaging to Hedge Against Interest Rate Hikes: An organisation called the Council of Mortgage Lenders, who represent almost all mortgage lenders in Britain confirmed that remortgage figures had increased by almost a fifth in the first quarter of this year following the announcements by the Bank of England.
A spokesperson said that they believe the news that interest rates are going to increase later in the year is the reason for the sudden increase in remortgaging.
Fixed rates have been particularly popular with homeowners looking to remortgage. With an estimated eight million households at risk from increased mortgage payments, borrowers have been turning to fixed rate remortgage deals to protect themselves against interest rate hikes.
Fixed rate contracts have a set interest rate for an initial period, and during this time, the monthly repayments will remain level and not increase regardless of what the Bank of England base rate is doing. Of course this offers financial security as borrowers will know exactly how much to budget every month.
Howard Ogollegos
Howard O'Gollegos writes for Just Commercial Mortgages.com the UK's No.1 site for the latest commercial mortgage rates and commercial property finance news.
View all articles by Howard Ogollegos