The interest rates have risen again with the bank of England trying to get inflation under control. There are now nearly two million homeowners who will see their mortgage repayments increase after it was hiked for a third in four months.
The bank of England has now increased rates for the third time in four months and has moved the bank rate up to 0.75. This is to try and reduce the cost of living. Although this is increasing as well.
This is the first time the official cost of borrowing has happened for three consecutive meetings since 1997 of the monetary policy committee.
The move means at least two million homeowners with variable mortgage rates will see their monthly repayments rise. It could add as much as £42 a month to somebody who has a £200,000 mortgage.
The latest increase puts more pressure on homeowners, who are already suffering from steep increases of food, petrol and energy prices, while they also have to pay high national insurance contributions from April.
Why is this happening?
The main reason is inflation. Inflation is the measure it increases to the cost of living and it is remaining stubbornly high.
Consumer prices inflation, the key measure, is currently running at 5.5% the highest level of 30 years. It looks as though the situation is going to get worse with the war in Ukraine putting further pressure on the price of petrol, food and energy.
The banks monetary policy committee uses changes of interest rates as their way to try and control inflation. However, with inflation currently running significantly well above their own target of 2% there are likely to be further interest rate rises to come.
What could it mean for you?
You may only be impacted by the change of interest rates if you are on a variable mortgage rate or a tracker deal where your lenders stand variable rates. These mortgages move up and down inline with the changes to the bank base rate. Around 850,000 people currently have a tracker mortgage with a further 1.1 million with a standard variable rate.
If you have a £200,000 variable mortgage, your monthly mortgage repayments will go up by around £42 a month as a result of the latest changes. This means your payments will cost an extra £108 a month as a result of 3x interest rates rises since December.
Nearly three quarters of homeowners with a mortgage are often on fixed rates deals and they will not see any changes to their payments.
With a fixed rate mortgage, payments stay the same for the length of the deal, which is usually two or five years.
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How can I change the situation?
If you have a property with us it is more than likely we have reviewed the rent for you over the past few months. The rents in Brighton and Hove have gone up quite dramatically and is mainly due to the current lack of supply that is on the market. You may find that the increase in your rent far exceeds the current increase in interest rates.
It may be that your tenants are currently in a fixed term agreement but we will always contact you beforehand and discuss the rental.
Do you have another property elsewhere that you don’t currently rent through us? Has this had a rent review? Are you getting the best out of your investment? Why not contact us for a free 30 minute discussion regarding this?
Could I change my mortgage fixed rate?
If you don’t have a current fixed rate you may be able to change to a fixed rate mortgage. If you are currently on your lenders standard variable rate you should think about potential re-mortgages to a more competitive deal. Or alternatively speaking to your current provider. The average standard variable rate is currently 1.96 higher than the average two year fixed rate deal. The difference in rates could cost you around an extra £330 or nearly £4000 a year if you have a £200,000 mortgage. If you are on a tracker deal and want to protect yourself from further interest rate rises, you may want to consider moving to a fixed rate one.
It is all down to each individual peoples circumstances. You will find that mortgage companies do deals on a regular basis so it is best to look into the market. If you do decided to re-mortgage then you should prepare to move as quickly as possible. There were over 518 deals last month that were withdrawn by lenders due to the change in interest rates. We anticipate that this will not be the last interest rate increase this year.
If you have any queries regarding your property or you wish us to value anything then please don’t hesitate to contact us on 01273 724000 or firstname.lastname@example.org