Homeowners Should Prepare for Another Interest Rate Hike in May

Homeowners Should Prepare for Another Interest Rate Hike in May

Many homeowners are facing higher repayments if not soon then in the near future. Interest rates are rising and it could be that rates will rise toward levels not seen since the economic crisis over a decade ago. The rates are increasing due to inflation rates not seen in 40 years and they’re not expected to come down quickly. Therefore, borrowers are going to be facing more expensive borrowing for a time.

The inflation target rate set by the Bank of England is 2.0%. The expected inflation rate in spring could be 8.0%. The Bank of England’s Monetary Policy Committee (MPC) has so far taken a gentle approach to try and slow the rate, and it is expected that continued small increases will occur.

The next MPC meeting is 5 May and many economic experts believe the rate will once again experience upward movement. The rate could reach 1.0% or higher. The next meetings will be held in June and August. With each rate increase, the cost of borrowing is more expensive. For homeowners that are close to having their mortgage term end or have already had their term expire and were moved to the lender’s standard variable rate (SVR) the increases could result in financial difficulty.

To avoid facing the higher interest rates and repayments, homeowners are seeking escape through remortgaging. So much so that some homeowners are choosing to pay a penalty fee and end their mortgage term early to secure a remortgage deal with the interest rate levels offered currently. Waiting could have them facing interest rate offers higher and perhaps double or more in the next coming months. 

Securing a remortgage, especially a fixed rate remortgage, provides the homeowner with financial stress relief as they are secured to the same rate month after month for the length of their term no matter what increases occur by the MPC.

Considering the Bank’s base rate was almost at zero in early December and had been steady for over a year at 0.1% and is now at 0.75% reveals the possible interest rates borrowers could be facing by end of year. 

Experts encourage homeowners to consider shopping for a remortgage sooner rather than later. Shopping online is a quick and easy way to determine what savings or safety net could be had by remortgaging. Lender websites usually offer quotes and remortgage brokers could offer many quotes to compare and review on their sites. Brokers might also have exclusive lender deals available. 

Remortgage shopping could reveal an opportunity to better weather the financial storm ahead and by preparing now, and shopping online is a good first step, a homeowner could find themselves less weary at the end of the interest rate hike storm.

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