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. 

House prices are expected to continue to rise throughout the first quarter of the year. Supply is extremely low and demand remains high. Experts believe that the continued low interest rates are helping to motivate buyers. In some cases, the continued pandemic is pushing buyers as the desire for space remains a top priority. The possibility of rising rates could also be a motivator as hopeful home buyers take action now that the cost of borrowing is becoming more expensive than it was only weeks ago. However, it could be the simple fact that rental costs are rising.