How the Latest Bank Rate Increase Will Affect your Mortgage
published on 09/11/2017
On the 2nd November the bank rate was increased from 0.25% to 0.5% and its now assumed that institutions which lend money for mortgages will do the same and increase their rates too.
This rise is the first in almost a decade, so many buyers will have grown used to low rates and never experienced a rate change in all the time they have had a mortgage. The change now is only slight. If you have an average tracker mortgage of £175,000 then your mortgage will rise by around £22.00 which is manageable.
However, if the mortgage rates rise to 3%, which is possible then someone with a 175,000 will have to find an extra 260 a month, which is a substantial amount. If you don’t have any savings it is worth trying to put away a certain amount each from now on so that should the interest rates rise again, you’ll have got used to putting away money and it won’t be so much of a shock.
First Time Buyers
If you are a First-time buyer on a fixed-rate deal you won’t see any change at the moment. But, when the deal ends you could find you’ll have to pay more than your expected. For some this can mean an extra payment of £141 per month on a mortgage of £136,000. However, you can look around for cheaper deals once your current mortgage deal has come to an end.
First time buyers should take a good look round for the best offers and compare the rates after any fixed deals you enter into are finished. Budget for increases and it won’t be so difficult if, and when they come.
The higher your mortgage, the more you will have to pay with people who have mortgages at around the £500,000 mark will need to pay around £53 extra per month.
Savers might make slightly more if they hold ISA’s but there shouldn’t be any excitement about making more money if your funds are in banks and building societies. It doesn’t look as if rates for savers will be improving anytime soon.
If you are looking for a rental property now is the time to take out a contract while rates still remain low. Buy to Let landlords might be thinking of raising rents in the future. The base rate rise at present will increase a £200,000 buy to let mortgage by £40.00 per month, but should the rate rise to 3% then then some landlords will be paying almost double.
If rates do rise again, look for rents with fixed rate incremental payments, so that you know how much more you’re going to have to pay each year.