I am sure many are aware of the interest rate rises over the last few months. The Bank of England base rate started to increase in March 2022 when we saw it rise from 0.25% to 0.5%, currently the Bank of England base rate is 5%. In turn the average standard variable mortgage rate is currently 8.45%*1.
Again, as I am sure many are aware the reason for the rate hikes is due to inflation. The Government inflation rate target is 2%. For the year ending May 2023 the Consumer Price Index measure of inflation in the United Kingdom held steady at 8.7%*2, unchanged from the previous month’s 13-month low, above market expectations of 8.4% and significantly higher than the 2% goal.*3
The Monetary Policy Committee (MPC) sets the Bank Rate, they sit once a month and their aim is to help the Government to reach their target inflation rate.
| think most of us understand the rationale around this, increasing interest rates means in turn mortgage payments increase, which means we have less money to spend.
However the impact can be delayed because for fixed rate mortgage holders the rate rises will not impact their mortgage payment straight away. Also not everyone has a mortgage.
According to data from the English Housing Survey*4, just over one third of households rent their home (36%); another third own their own home outright (35%); and just under a third own their home with a mortgage (30%), in the UK.
So what would our advice be if your fixed rate period is coming to an end soon? We would recommend that you look at your situation as early as you can and do not bury your head in the sand. We offer a free without obligation consultation so if you would like some advice on this matter please pick up the phone today.
*1 www.uswitch.co.uk
*2 Forbes
*3 Office for National Statistics*3
*4 NimbleFins