The Bank of England last week announced that the Base Rate of Interest would be held at it’s current record low of 0.1% – for now.
While many were anticipating an increase amid rapidly rising inflation, the Bank’s Monetary Policy Committee surprisingly voted to keep Base Rate at 0.1%, prompting questions over when exactly rates would increase.
“We have seen this week mortgage rates begin to increase across all ranges, in anticipation of the expected rate rise” says Andy McBride, director of Professional Contractor Mortgages. “Many thought that it would be this week that the MPC voted to increase, however it caught many by surprise when it was announced on Thursday that there would be no change.”
“Thanks to inflation now nearly doubling the government target for 2021, it is inevitable that Base Rate will increase – it’s not ‘if’ but ‘when – but it’s a fine margin as to when the right time is. Too early and banks could be caught out with loans costing more to secure the funding than they charge in interest, too late and the hike in interest payments on many loans could be too much to bear.”
The news comes as it is revealed by Halifax that house prices have reached a record high, yet again, with a quarterly price increase of 2.3%, taking the average price of a UK home to £270,027.
“UK house prices climbed again in October, as the value of the average property grew by 0.9%, an increase of more than £2,500 during the month” said Russell Galley, Managing Director at Halifax. “With prices rising for a fourth straight month, the annual rate of inflation now sits at 8.1%, its highest level since June.”
“One of the key drivers of activity in the housing market over the past 18 months has been the race for space, with buyers seeking larger properties, often further from urban centres. Combined with temporary measures such as the cut to stamp duty, this has helped push the average property price up to an all-time high.”
With Base Rate unlikely to remain static for long, the knock on effect will almost certainly mean that mortgage rates also rise, with many already feeling the effects of market uncertainty.
“Several clients have already this week had to rush to submit applications ahead of lenders introducing new, higher, rates” adds McBride. “Just like the scramble for submitting applications to meet timescales around the Stamp Duty incentive, it will almost certainly lead to a bottleneck in processing, particularly ahead of a traditionally quiet December in terms of staffing levels.”
“With new year approaching many homebuyers will be looking to make offers in January, however it’s likely that the rush to secure a low, long-term rate for remortgages will mean that the first quarter of 2022 is phenomenally busy.”
Contact our expert team today to see what your options for remortgage are, to avoid the sting of rate increases.