Homeowners should prepare for higher interest rates associated with their lender’s standard variable rate or if their mortgage rate is connected directly to the Bank of England’s standard base rate increases.  According to the Governor of the Bank, Mark Carney, the time for the interest rate to be hiked and borrowing to become more expensive is “getting closer”.  Currently the Bank’s interest rate is at 0.5% and has gone unchanged since March 2009. 

The economy is rebounding and there is strong growth and rapid job creation, which along with other economic factors will put pressure on the Monetary Policy Committee to begin what is expected to be slow and steady increases to the interest rate.

Mr. Carney stated to conference attendees in Wales on September 25, “Relative to the recent past, the economic outlook is much improved.  While there is always uncertainty about the future, you can expect interest rates to begin to increase.”

Mr. Carney also stated that any increases would be “limited and gradual”. 

Homeowners are encouraged to shop around for a remortgage deal now while demand is low and lenders are offering some of the cheapest remortgage deals seen in years.  Rather than settling on the lowest interest rate offered, experts state that the remortgage as a whole should be viewed.  Consider all fees and any penalties for ending a mortgage deal early and determine if perhaps a remortgage with a higher interest rate offers better savings than the lowest interest rate remortgage offered. 

The Bank of England’s Monetary Policy Committee will be meeting next week to vote on an interest rate change.  Experts do not expect the October meeting to result in a higher rate but once the minutes are released later in the month, the true tone of the meeting and how close the vote came to an increase will be known.