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This is the 10th consecutive time the Bank has increased the base rate, this time by 0.5 percent. The increase means for an average UK property worht £270,708 with a 75 percent LTV, monthly repayments will go up by another £52.
Alexandra Loydon, director partner for engagement and consultancy at St James’s Place, encouraged people to look around to make sure they get the best rate.
She explained: “It’s always worth ensuring you’re getting the best rates of interest and so shopping round for the best savings accounts does make sense.
“If you’re not on a fixed term mortgage or nearing the end of your fixed term, then again it’s worth shopping around for the best rates, but in the first instance contact your existing provider to ensure they are offering you the best deal they can.
“It’s hard to say with any degree of certainty whether interest rates will continue to rise, but given the pace at which inflation is reducing and what’s driving this, plus the Bank of England’s target, it’s likely we might see future interest rate rises, so one might argue that locking into a fixed rate mortgage for the next two years, might be a sensible move.”
Tim Bannister, property expert at Rightmove, said people on tracker mortgages will need to consider their higher repayment costs when looking at their monthly budgets.
He commented: “It’s likely that many of those on a tracker mortgage will still be on a lower rate than most current fixed deals even with this increase, so we’re unlikely to see any rush to fix from this group just yet, although with the gap between tracker and fixed rates narrowing it may prompt more people to see what’s on offer in the coming weeks.
“For those considering taking out a fixed mortgage deal soon, the good news is that this increase was widely expected by the financial markets and will have likely been factored into their plans.
“This means that we may see fixed-rate mortgage deals continue to edge downwards in the first half of this year, as some stability and calm continues to return to the markets.”
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The housing expert warned further interest rate hikes may happen this year but the future remains uncertain.
He said: “We’re still seeing buyer demand higher than the last normal housing market of 2019, indicating that people have the confidence to get on with their moves and if fixed deals do head further downwards this may encourage people further.
“We may see further increases in the base rate later this year but it’s difficult to predict how it will impact mortgage rates.”
Ms Loydon warned it could take months or even years for the rate of inflation to reach two percent, which is the Bank of England’s target.
The most recent CPI measure of inflation was 10.5 percent, after it peaked late last year at more than 11 percent.
She said: “In simple terms higher inflation means cash is worth less, but higher interest rates means you get more for your cash, if you save it in an interest bearing savings account.
“The Monetary Policy Committee (MPC) [of the Bank of England] is using interest rates as means to reduce the rate of demand driven inflation – higher interest rates encourage people to save – it drives down consumer demand and spending.”
The Bank of England has said monthly payments for around four million owner-occupied mortgages are expected to increase over the next year.
Alastair Douglas, CEO of TotallyMoney, urged people to contact their lender if they are at risk of defaulting on their mortgage.
He said: “The Financial Conduct Authority recently instructed firms to support borrowers with measures which included allowing customers to make lower repayments, switch to interest-only, or moving to a different rate.
“Missing a payment could impact your ability to access credit for years to come. Not just for big ticket items like loans and mortgages, but also for things like mobile phone contracts and car insurance.
“Lenders usually check a customer’s credit report during the application process, and the best deals are reserved for those with the best scores.”
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