The UK is getting used to record breaking in the housing market and also in the lending market. As of late, the housing market has reached new highs again and again as house prices rose due to strong demand brought about by the pandemic. Also, last year, until December, borrowers had access to extremely low interest rates. The Bank of England’s Monetary Policy Committee (MPC) in response to the global pandemic lowered the standard base interest rate to the lowest level ever in over 300 years. 

In December, the Bank of England’s Monetary Policy Committee (MPC) surprisingly raised the standard base interest rate from the hundreds of years low level of 0.1% to 0.25%. While still low, the interest rate more than doubled. Lenders quickly followed with changes in their offerings in lending. Homeowners that had been waiting to take action, and home buyers forced by high demand to wait out their choices in the housing market missed out on the best offerings in remortgages and mortgages. There had been an expectation of the first rate hike to come in the start of the new year, and while December was a surprise, the warnings are clear that another hike is likely in February.

Homeowners have been encouraged to shop for a remortgage sooner rather than later or face higher costs with rising interest rates. In December, the Bank of England’s Monetary Policy Committee (MPC) voted by majority to increase the standard base rate. Now, there could be yet another rate increase during the next MPC meeting on 3 February. According to a recent report focused on the possibility of a rate hike, it is expected the current 0.25% rate could be doubled to 0.5%.

When it comes to borrowing, it is all about the interest rate. Though there are other costs that could be involved in borrowing, especially with property in which there can be valuation and legal costs, the interest rate takes full center spot in shopping for the best loan. The interest rate determines the cost of borrowing. The lower the rate the cheaper the cost, and the higher the rate the more the borrower will pay. 

Homeowners are taking notice of the opportunity available with remortgaging, but many could be missing out. According to a study, a large number of homeowners were completely unaware of the benefit of remortgaging and others had misconceptions of what a remortgage does. In basic terms, remortgaging is getting a new mortgage by the homeowner. When their first mortgage was obtained it was connected to a term, or length of time in which the agreement would be set as to what interest rate would be charged to the homeowner. Once the term ends, the homeowner can allow the lender to move their loan to the lender’s standard variable rate (SVR) or the homeowner could remortgage and secure a loan with the interest rate and terms they desire. 

The current low interest rates, rising rental costs, and the impact of the pandemic have made for strong arguments to buy a home now rather than later. Yet hopeful home buyers are facing a major hurdle in climbing onto the property ladder due to record high asking prices. The lack of supply and strong demand is pushing prices upward and in many cases making homeownership out of reach of first time buyers.