We knew it was coming, and on Thursday 2nd November 2017, it arrived. The Bank of England announced it would increase the base rate from 0.25% to 0.50%, signalling the first rise in a decade. This put many people with mortgages in new territory. Anyone who has taken out a mortgage in the last decade will have experienced nothing but interest rate falls. These took the base rate to an all-time low of 0.25%. While many would say we have got away without a rise for longer than expected, when it did come, the rise left many wondering how their mortgage rates would be affected. A delayed effect for many “Many people will have a fixed-rate mortgage, which means this rate rise won’t affect them for the moment, at least,†explained Darren Pescod, CEO of The Mortgage Broker Limited. “However, anyone who is considering remortgaging their property will likely be met with higher rates than if they’d changed before the rate rise came into force. “The bigger concern now will rest with anyone who was on a variable-rate mortgage before the rate rise came into effect. They may already have been notified of a rise in the interest rate on their mortgage, or will be in due course. Just over a third of those with mortgages have a variable rate product. How much extra will mortgage holders need to pay each month? While the Bank of England only raised rates by a quarter of a per cent, this will still see mortgage payments on a £150,000 mortgage rise by £21 a month. Obviously, mortgages greater than that will see bigger pro-rata rises. “Obviously the effect of the rise will be seen and felt more by those who have much tighter margins on their budget each month,†Darren Pescod added. “The introduction of stricter mortgage regulations made it much harder for people to get mortgages if they cannot prove they can afford to repay them. This should lead to fewer affordability problems than might have been the case if the rules hadn’t been brought in. That said, some customers are likely to find it harder than others to find the extra cash needed to meet their mortgage payments each month.†What of the future? The Bank of England is expecting this to be the first of several rises in interest rates to occur over the next three-year period. It estimates there will be two more of 0.25% in the next few years. It certainly looks as though we have seen the end of the super-cheap mortgage. Anyone with a fixed-rate deal will be fine for now, and will remain unaffected by the rise. However, it will be more important than ever to explore the market for a competitive fixed-rate deal when their current one ends. For those on variable rate deals, the time to secure a cheap fixed-rate alternative looks to be over. However, there are still affordable deals around for those willing to look.
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