In June 2023, the Bank of England announced an increase to its base rate by 0.5%, rising to 5% in the thirteenth rise since December 2021. Inevitably, this will affect everyone throughout the UK. So, what does it mean and how does it affect your mortgage?
Approximately 2.2 million people in the UK are on variable rate mortgages, either on a base rate tracker, discounted-rate deal or a standard variable rate (SVR).
For those on a tracker, directly following the base rate, payments will soon reflect the full rise. SVR’s change at the lender’s discretion, although most will go up.
If you are on any kind of variable rate and are concerned about future rate rises check to see whether your mortgage has any penalties for changing your deal early and take advice from your mortgage adviser on whether suitable fixed rate options are available.
Over 6 million mortgages are on fixed-rate loans. For those on a fixed-rate mortgage, the base rate increase won’t affect their deals until they come to the end of their product term. For some that might be in a few years’ time, for others this could be in the coming months or weeks.
We are well into 2023 and as the squeeze on cost-of-living continues, it may seem like your finances are restricted.
How will it affect your mortgage?
If you are one of the 6 million UK homeowners on a fixed rate mortgage, you won’t have to consider a change until the end of your deal so there is time to plan ahead.
The key is to look at options well in advance of your deal ending. We are speaking to clients approximately 7 months before the fixed rate ends.
You will have an option to secure a new deal with your existing lender and many lenders make those deals available 6 months in advance. Most lenders allow you to book a new rate so hedging against any subsequent rate increase. However, if rates come down, most (but not all) lenders allow you to cancel the booked rate and re book lower rates as long you do this a few weeks before the current deal ends.
Re-mortgaging
If your existing lender doesn’t offer competitive rates to existing customers, you may then have an option to re-mortgage. Lender’s mortgage offers generally last 6 months so, again, you have the opportunity to secure a rate well in advance. This can protect you against further increases, but still give the option of taking advantage of lower rates should rates reduce before your current deal ends.
In recent years the mortgage market has become very complex with frequent changes to products and criteria. Never has been obtaining advice from a whole of market mortgage adviser been more important. As well as securing a new deal, your adviser will be able to help you with ways of mitigating any cost increases and also advise you of the details of the new Mortgage Charter, designed to help mortgage holders struggling to meet their mortgage payments.
Check to see when your current deal ends and if your adviser hasn’t already been in touch 7 months before the deal ends, make contact with them to discuss your options.
One of our mortgage advisers will be happy to help source a suitable mortgage for you. You can contact us on 01329 282882 or use our Facebook or Contact Us page.
Your home maybe repossessed if you do not keep up repayments on your mortgage.