• Pensions

    Pensions+

    Whether you're saving for retirement or you are facing decisions at retirement, we can help

    View more
  • Savings Planning

    Savings+Planning

    Saving for the future is important and we can help you select the right product to achieve your goals

    View more
  • Mortgage Advice

    Mortgage+Advice

    We are specialists in arranging mortgages for First Time Buyers, people moving home, 'Buy to Let' mortgages and remortgages.

    View more
  • Investment Advice

    Investment+Advice

    Make the most of your money and don't leave it languishing in Building Society accounts

    View more
  • Equity Release

    Equity+Release

    Allows you to access cash tied up in your home - speak to one of our qualified advisers

    View more
  • Protect Insure

    Protect+Insure

    We can shop around for the lowest cost life cover, income protection and critical illness cover

    View more
 

Remortgage and beat the base rate rise

Yesterday's revelation that inflation has hit a five-year high has got everyone talking about the possibility of a base rate rise, with some thinking it could happen as soon as next month. This means it's time to get prepared, and sorting out your mortgage should be at the top of the list.

What could a base rate rise mean for my mortgage?

Mortgage rates have been falling for years, hitting fresh lows on a regular basis, and borrowers have been reaping the rewards. As a result of that, many could have become accustomed to record low repayments; yet if base rate rises, mortgage rates could follow – there are already signs of interest rates edging up, with lenders raising their mortgage rates in anticipation of a base rate rise – so it's time to get your borrowing commitments in order.

Research from TSB shows that some 2.6 million people have become homeowners since base rate last rose in July 2007, which means there's a whole generation of borrowers who have never experienced an increase. Indeed, 68% of survey respondents said they didn't know how a base rate rise will affect them, and 66% are worried about the possibility of mortgage rates rising, highlighting the need to prepare.

Hopefully, many of those borrowers will currently be on a fixed rate mortgage deal, which means their repayments won't be impacted. However, for those with tracker or variable rate mortgages, or those approaching the end of a fixed rate term, any increase to base rate could lead to a swift rise in repayments.

It may not be a huge increase, but it'll be an increase nonetheless; TSB's calculations show that a base rate rise of 0.25% could lead to a typical variable rate mortgage repayment rising by £13 a month, based on a £100,000 mortgage balance, or by £26 a month for those with a £200,000 mortgage (based on a 20-year mortgage term and a typical variable rate rising from 3.74% to 3.99%).

Start preparing

You may want to start factoring these kinds of increased costs into your monthly budget to see how you could absorb them. It needn't take much – cutting out the daily shop-bought coffees or sandwiches, for example, or sacrificing the weekly takeaway could be all it takes to make up the shortfall.

Take a look at your outgoings and see where cutbacks can be made. TSB found that 67% of respondents would buy cheaper groceries if they had to cut back, while 64% would eat out less and 43% would bring a packed lunch to work, with any one of these solutions going a long way to helping you boost your bank balance and cover any rise in repayments.

However, to really make a difference to your monthly outgoings, why not remortgage? Switching to a fixed mortgage rate can guarantee your repayments for the long term, regardless of what happens to base rate in the near future, and you could save hundreds of pounds in the process. Indeed, TSB found that a typical borrower with a £100,000 mortgage on a standard variable rate could save £119 per month, or £2,859 over two years, just by switching to a better deal, so why not see if you can do the same?

Above all, don't panic – even if base rate rises, it won't be a significant increase, which means your repayments shouldn't rise to any extent. Having said that, you'll still want to start comparing mortgage rates to stand the best possible chance of nabbing the best deal, as fixed rates aren't going to stay at record lows for long.

"We don't know when the Bank of England will change the base rate, but we do know that preparing early is the first step in helping Britain's homeowners to get ready for a rate rise," said Ian Ramsden, director of Mortgages at TSB. "There's no need to panic and no one is suggesting sudden large increases in the base rate; but just a little planning now can make a big difference in the future."

Source:  Moneyfacts

Sam: 23rd Oct 2017 10:37:00

 

Latest News

Lenders relax maximum mortgage age
Lenders relax maximum mortgage age If you're an older homeowner, the last few years may have been challenging if you were looking to remortgage your property.

Read More >>

Drawdown investors remain optimistic
Drawdown investors remain optimistic The onset of the pension freedoms gave retirees more choice than ever over how to spend their pension pot, and many are making the most of that flexibility by opting for income drawdown, whereby their pension savings remain invested in the stock market. Yet this in itself can pose risks, particularly given how volatile the stock market can be, but luckily, investors don't seem to be put off.

Read More >>

Equity release lending hits record £3.6bn
Equity release lending hits record £3.6bn 2018 proved to be another record year for the equity release sector, with latest figures revealing that retired homeowners released £3.6bn in property wealth over the year, the highest annual total ever seen – and by all accounts, 2019 could go even better!

Read More >>

Motivation to remortgage at 11-year high
Motivation to remortgage at 11-year high The financial incentive for mortgage borrowers reaching the end of their current fixed rate deal to remortgage to a new deal has soared to an 11-year high.

Read More >>

What's coming up in 2018....

Read More >>

See all News...
  • Pensions

    Pensions+

    Whether you're saving for retirement or you are facing decisions at retirement, we can help

    View more
  • Savings Planning

    Savings+Planning

    Saving for the future is important and we can help you select the right product to achieve your goals

    View more
  • Mortgage Advice

    Mortgage+Advice

    We are specialists in arranging mortgages for First Time Buyers, people moving home, 'Buy to Let' mortgages and remortgages.

    View more
  • Investment Advice

    Investment+Advice

    Make the most of your money and don't leave it languishing in Building Society accounts

    View more
  • Equity Release

    Equity+Release

    Allows you to access cash tied up in your home - speak to one of our qualified advisers

    View more
  • Protect Insure

    Protect+Insure

    We can shop around for the lowest cost life cover, income protection and critical illness cover

    View more