Mortgage Rates. Where Next? Comments Off
A press release landed in my inbox today that hit a nerve. Hard. It still hurts now…
Legal & General’s Mortgage Club has today warned borrowers not to sleep walk into higher mortgage repayments. As speculation continues as to when the base rate is set to rise, with many commentators suggesting 2015, lenders will inevitably turn their attention to pricing in the change prior.
In essence, even if the base rate stays the same, what they are basically saying is we’ll raise rates anyway. Given – despite what anyone may have you think (you only need to look at the LIBOR scandal to prove otherwise), all banks are in it together. If one raises their rates – just as sure as you can bet all energy firms will follow – all banks will follow, too.
A quick analysis of the likely increase in repayments shows that a rise in rates of just 0.5% on a typical mortgage worth the UK average of £150,000 would amount to an extra £62.50 per month which equates to a not insignificant £750 per year increase in mortgage bills. And who is to say that any rate rises would be just 0.5%, and be limited to just the one rise?
The point of the press release was actually a reasonable one – and that’s to look for, and switch to if necessary, a decent fixed-rate product. If you’re currently sitting on an SVR mortgage, it’s time to start looking around for where to head to next. This isn’t immediately urgent, but something to start working towards in the coming months. The SVR bandwagon won’t be so rosy in 12-18 months time so it’s a great time – now, while you’re not under pressure – to start doing something about it and have a vague plan in place for nearer the rate-rising time.
Jeremy Duncombe, Director, Legal & General Mortgage Club says:
“Borrowers can’t afford to be complacent. Lenders will price in a change in base rate well in advance of any decision to increase and therefore the historically low rates we have seen in recent times are not going to be around for long. Borrowers should look at their options and talk to an advisor to tie down a more favourable deal while they still can. A mortgage is the largest financial commitment many of us will take out in our lives so it is crucial that borrowers make changes that are suitable for their own circumstances. Speaking to a mortgage adviser is the best way to understand all the options available and to secure one of the good deals that are still available at the moment.”