Mortgage Rates: November 2017 Update
With the Bank of England increasing their base rate from 0.25% to 0.50% at the start of November 2017, a lot of people have been wondering what impact this will have on them. There is obviously an overall impact on the whole economy but by and large, people are more likely to be affected by how this impacts on their bank account and their wallet.
When it comes to the general economy, there is a difference of opinion, which is fairly standard when it comes to matters that impact on the economy. Some specialists believe that this will harm the economy, removing much of the optimism that has been stimulating growth in recent times. However, there will also be people who believe that this is a good step forward as it will stifle the likelihood of inflation.
Fixed rate mortgages are currently not affected by these changes
As for how it impacts on people directly, fixed rate mortgage holders will be chuffed with themselves at this point in time. The key benefit of holding this style of mortgage comes with the fact that if interest rates rise, you don’t have to pay more money. Fixed rate mortgage holders don’t have to worry about paying more money at the moment, which is a great comfort.
However, these mortgage holders shouldn’t get too comfortable. When this agreement ends, they will need to ensure they find a suitable mortgage agreement to replace it or they could find that their monthly payments increase by a significant amount.
For the moment though, all of the focus falls on variable rate mortgage holders. As an example, anyone who holds a Nationwide base mortgage rate, will see their rate rise to 2.5%. A mortgage holder with a loan of £175,000 will find that their monthly payments will rise from £763 per month to £785 per month. This is a rise of £22, and it is up to each individual to determine whether this is a suitable amount or not.
Further increases could be on their way
With suggestions that the Bank of England will impose two further interest rate increases before 2020, people have to be aware that they may have to pay a lot more money to make their monthly mortgage payments. This is why it is important for mortgage holders to be proactive and make sure they are confident about meeting their payments.
A study undertake by The Resolution Foundation suggests that 11% of households will be impacted on by this change. When interest rates last rose, over a decade ago, a similar study was undertaken y the organisation and they found that 19% of households would be affected.
There are two key reasons for the smaller return with this change. Firstly, it has been found that there is a smaller number of house ownership in the UK at this point. There is also the fact that a greater percentage of mortgage holders have a fixed rate mortgage.
It is vital that you stay on top of your mortgage and if you want to ensure you know the latest changes in the property market, stay in touch with Liberty Gate.