Gearing up for another Rate Rise

The Chancellor last week gave his Spring Statement and as promised it really was just an update on how things are going with no policy announcements, which is perhaps a good thing. There have been enough changes and people just want to get on with life!

He did note, however, that he expects inflation to come back within the 2% target level over the next 12 months, which some say will help to stave off pressure on the Bank of England to increase rates.

However, with the economy growing slightly more than predicted it still looks like a rate rise will come this year, with many economists still saying May looks likely. If nothing else, another small change will give them more room for manoeuvre if Brexit negotiations go South and there is a need to cut again.

With all this talk it is no surprise that, according to UK Finance, remortgage activity hit a 9-month high in January as more and more borrowers look at their options and keen to lock in to some of the competitive rates still on offer and avoid potential increases in monthly payments.

The difficulty is that rate changes are happening at a rate of knots, with lenders operating a scatter-gun approach. Each week there are some that rise and some that are cut as lenders play off against each other and the Best Buy tables to target certain areas where they want to do business. Keeping up to speed with it is a full-time job, (which is luckily exactly what we do!), but it can be frustrating when the paperwork is assembled only to find that the rate has changed.

With this in mind, it makes sense for anyone looking to remortgage to start researching the market between 4 to 6 months before the end of your product. Your lender will, or at least should, write to you around 4 months before to tell you what they can offer if you stay with them, so it is a perfect time to compare the market against this.

What is also important at this stage, is to think about your requirements going forward rather than just switching to a new deal. For example, it may be a great opportunity to reduce the term of the mortgage and save thousands of pounds on interest over the full term of the loan. As rates are low, it may be that you can now afford a 15-year term rather than say a 20-year term, or if you have savings, using these in an offset account could also help reduce your payments or the term of the loan.

Conversely, it may be an opportunity to borrow more in order to do that loft conversion or put in a new kitchen.

Whatever the case, comparing the rate your lender has offered against over 11,000 products from over 90 different lenders makes total sense. Which, of course, is where we come in.

Contact us now for a no-obligation mortgage review.