On Thursday 3rd August 2023, the Bank of England raised interest rates by another quarter of a percent writes Ruddington’s Benwell Daykin Estate Agents.
This has now taken the base rate to 5.25 per cent and is the 14th consecutive hike. This is also the highest interest rate since March 2008, the year of the financial crisis.
So what does this mean for you?
Why are interest rate rises happening?
By rising interest rates, the Bank of England is hoping to bring down inflation. Inflation is very high right now which is contributing to our cost of living crisis. By increasing interest rates, the BoE are hoping that many will stop spending and save money instead. This, in turn, should hopefully lower the price of goods.
What will happen to mortgage payments?
The interest rate increase can be a troubling time for some. For instance, there are over 1.4 million people in the UK who are on a variable rate residential mortgage. This means that their payments fluctuate along with interest rates.
Some home owners could now see hundreds of pounds added to their monthly payments which, during a cost of living crisis, is definitely not ideal.
What can you do to ease any pressure?
There are several things you can do to ease pressure if your mortgage bills are rising. The first is talk to a qualified mortgage broker. Whilst this blog can offer guidance, every financial situation is different. You can talk to a qualified broker for free by calling our offices on 0115 990 2007.
You can also talk to your lender. Some are now offering a switch to interest-only products. This means you only pay the interest on your mortgage every month, rather than the full payment. Whilst this does lower your monthly costs, be aware that you won’t be making payments towards your home, only to the lender’s fees. This will likely extend the term of your mortgage.
Moving to a fixed-rate mortgage could also help. If you are on a variable rate where your payments fluctuate, you may be financially better off by fixing in the rate for 2, 5 or 10 years. Again, talk to a qualified mortgage broker to see which option is best for you.
The good news
It’s not all doom and gloom, however. Santander, for example, actually cut their mortgage rates ahead of the base rate rise. So there are deals still to be had if you talk to a qualified mortgage broker.
It may also be easier for you to purchase a property right now. House prices have dipped slightly which means you may be able to afford that property of your dreams.
Looking to see how much your property is currently worth? Ruddington’s Benwell Daykin can offer free property valuations. Find them at 12 High Street, call them on 0115 990 2007, or email info@benwelldaykin.co.uk.
