For most people, the 2007 recession was the beginning of a bumpy road of financial uncertainty.  To help the economy, the Bank of England reduced and kept interest rates at a stable level for 10 years.

On the 2nd November 2017 the Bank of England increased the bank base rate to 0.50%, the first increase in rates since July 2007.  After a decade of low rate economic stimulus, what does the increase mean?  Is there a reason for concern?

Let’s put this into context. In March 2009 the base rate dropped to a historic low of 0.50%, where it remained until August 2016. In the wake of the Brexit vote, the Governor and his team decided the economy needed a bit of a jolt and dropped the rate to 0.25%. Therefore, the current base rate is exactly the same as it has been for the majority of the last 10 years.

Assuming you have some form of tracker or variable rate, you may see your monthly mortgage payment increase by around £12, based on a mortgage of £100,000 over 25 years.

Is there a need to panic? A cool head always prevails. Over the past couple of months lenders have factored in the expected rate rise and we have seen the longer term fixed rates rise—even if that rise is only slight. Conversely, we have seen some lenders actually reduce their fixed rates recently, some by as much as 0.70%.

What should I do?

First and foremost, do not react hastily. If you are thinking of remortgaging, don’t assume that you have missed the boat. We have seen some increases in rates but those are generally quite small and interest rates still remain very low.  If you need to look at your mortgage options, now is the time to explore your options. Make the most of your opportunities in a season of uncertainty.

Feel free to pass this on to friends and family. If you need us to help please contact us on 01245 860866


 

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