Industry experts are encouraging people to protect their finances from future increases to interest rates, as soon as they possibly can. Experts say that an increase to the base rate by the Bank of England is imminent and so they should ensure that they are locked into a fixed rate mortgage. The increase may come as early as November, and this would be the first increase since the base rate went to 5.75% in 2007.
Over the past few days, we have seen many big banks and building societies, such as Barclays, Atom, Halifax, Nationwide, Skipton and many others increase the price of new mortgages in anticipation for the change. This is a potential issue for those looking to remortgage or to buy a property. The cost of existing home loans won’t change until the increase to base rates, and even then only those on variable rates will see a change to their repayments. There are a number of elements to your investment to consider, ensuring that you can still benefit from your investment.
Be sure to shop around
Before your current deal ends, the lender will often contact you with a range of different deals. Typically, the deals that they offer you will be the easiest to secure, particularly because you are already with them and it will be easy enough to switch you to a new deal. However, they most certainly won’t be the cheapest deal on the market, so it is essential that you shop around and contact various other lenders to see what they can offer you.
Begin your mortgage hunt before the end of your current deal
As a borrower, you do not have to wait until the end of your current deal before you can go on the hunt for a new one, and it would actually benefit you to begin your search long before the end or your current deal. This will enable you to have an easy transition from one deal to the next, but it will also mean you have the ability to avoid being put onto your existing lender’s variable interest rate, of which will be initially higher anyway. If your current deal has only a couple of months left to run, taking immediate action now will also give you enough time to make the relevant changes.
Some lender’s, including Barclays, Skipton and Tesco, allow you to agree a new deal 6 months before the end of your current deal. However, a big drawback with this method would be that if you choose not to remortgage, the upfront fee will not be refunded to you. As well as this, the length of a new deal may be reduced due to the fact that fixed interest rate loans typically last until a set date.
Choose fixed periods carefully
As interest rates are likely to increase in the near future, a fixed rate loan would be the perfect option for you to take. It is often the case that the shorter the deal, the lower the rate will be, so it is important to find the right balance between length of time and price, especially when considering that a longer term deal offers more financial security. Two-year fixed rate deals may be better suited to those with little equity in their home, mainly because after the two years has passed, they will have incurred enough equity to secure a better mortgage rate.
Consider arrangement fees
It is very important for borrowers to understand that the lowest interest rate deal isn’t always the very best deal for them to agree. Lower-priced deals can sometimes mean that much higher arrangement fees are associated with the deal, making them more expensive than those deals with higher interest rates but lower or no arrangement fees. Agreeing a mortgage deal really does require you to find the perfect balance of everything, making the whole deal suit your own individual circumstances as best as possible, and that includes considering any arrangement fees involved.