Today’s announcement by The Bank of England that it’s raising the base rate to 5% (the highest rate in 15 years) is worrying news for mortgaged homeowners or those looking to get on the property ladder. Are you worried about your mortgage?
Despite the alarming news headlines, our advice is not to panic.
Mortgage rates have steadily risen as the Bank of England has progressively increased the base rate. And this half a percentage increase will undoubtedly affect rates further. Anyone on a tracker or variable rate mortgage will see an immediate increase in their regular payments. However, there are options available to mortgagees to help reduce their monthly mortgage payments, and it’s worth exploring these with a professional adviser.
Options to reduce your mortgage payments
Potential options to help lower your monthly mortgage payments include:
- Extending the mortgage term – either on a temporary or permanent basis
- Consolidating debt
- Switching to an interest-only mortgage
The possibilities open to you will depend on your circumstances and might not suit you, but they could offer a financial lifeline.
Should you switch from a variable rate to a fixed rate?
If you’re on a variable rate or tracker mortgage, switching to a fixed rate won’t save you money. However, a fixed rate will protect you from future rate rises and give you certainty about your monthly mortgage costs. On the flip side, if the base rate starts to come down, you could be stuck paying a higher interest rate on your mortgage.
When should you re-fix?
If you have a fixed-rate mortgage which is up for renewal within the next six months, start looking at your options now. You can lock in a new rate up to six months before your current deal ends but still have the flexibility to switch to a different product if rates come down. Planning ahead also gives you ample time to fully research the market and find the right deal for your new mortgage.
If you’re worried about your mortgage situation, we recommend seeking advice from a professional mortgage broker. A broker can help you assess your options and source the right mortgage for your circumstances.
For help with your mortgage, please get in touch.