Will Rates Come Back Down Anytime Soon?

Will Rates Come Back Down Anytime Soon?

Over the past year or so, there has been an increase in interest rates in an attempt to control inflation. The impact is not great and many homeowners on our lovely Island are worried about the impact on their mortgage repayments.

Will My Mortgage Payments Go Up?

For homeowners who opted to follow certain advice recently and opt for a tracker or even remain on a standard variable rate mortgage, the increases in the interest rate will more than likely result in higher mortgage payments. Tracker mortgages mean that the interest rate tracks the base rate directly, therefore the increase in payments will take effect immediately in line with any increase.

For homeowners with variable rate mortgages, the impact will be less predictable. Essentially, the lender decides whether or not they’ll increase their own interest rate. However, in most cases, it’s likely they’ll decide that increasing their rates is the best course of action to maintain their profits.

For homeowners with fixed rate mortgages, though, the news is much better. Their interest rate will be locked in for their specified term and, therefore, their monthly payments won’t see any immediate change due to the increase in interest rates.

Nevertheless, keeping a close eye on the situation is important, though, since when your fixed term ends it’s more than likely that your mortgage repayments may increase dramatically if there has been a significantly rise in rates since the offer was secured. A recent report by the Resolution Foundation suggested the average household mortgage will increase by over £250pm next year.

Are Interest Rates Going To Increase Again?

Interest rates are reviewed by the Bank of England eight times per year. The next decision will take place on 22 June 2023. Ideally the initial target is to keep inflation at about 8% and, as energy and food prices are putting more pressure on our economy, the Bank of England has a tough job on their hands. While nothing can be certain, market experts are now saying that another increase in the interest rate is looking likely. Depending on inflation and other market factors, more may follow in 2023.

Is Remortgaging Now A Good Idea?

There was a lot of mixed messages at the beginning of this uplift in rates with some high-profile persons (media driven) even suggesting Trackers are the way forward as the rates will come back down very shortly. They were almost suggesting that this is a blip. Six months on and the thought within the industry is that Rates dropping of any considerable note is likely to be a more of a medium-term view once everything has settled and is back in balance. Whether or not you should consider remortgaging now will depend on the deal you currently have. In the medium to long term savings may be made if you remortgage now.

If your fixed rate mortgage will be ending within the next 9 months, getting a new deal arranged now instead of waiting until your term comes to an end is certainly worth discussing. Get your options. If your mortgage is a tracker or standard variable loan and you’re concerned about interest rate increases over the years to come, finding a new fixed rate deal now may be one effective way of locking in your repayments so you’ll have some stability going forward.

Getting the right mortgage advice couldn’t be more important in this climate and the team here at Prospect Mortgage are on hand to help. We are Independent and unlike many others in the property market, we act for you, the customer.

Call us on 01983 616666 or drop us an email at info@prospectmortgage.co.uk to get the information and guidance you need.