Potential Emergency Base Rate Rise Threatens Disposable Income
With mortgage lenders unilaterally pulling fixed-rate mortgages from the shelves, brokers are preparing their clients for increased costs as their fixed-rate terms come to an end.
600,000 fixed rates will expire in 2022, three times that amount in 2023. Many of these existing fixed terms were secured with rates in the low 2- or even 1%s.
With swap rates — the tool that enables banks to set future pricing — now commanding >5%, homeowners may see their current interest rate quadruple when they next remortgage.
A unique combination of factors has led to this point, some within our control, others not.
Foremost is the Bank of England’s pledge to raise interest rates if necessary in the face of last week’s mini-budget, the full ramifications of which we’re yet to realise for GBP. Add on inflation, the war in Ukraine and the cost-of-living crisis and the BoE is facing a perfect storm.
Given these dynamics, it’s impossible to say when stability will return to the market. The general consensus is that swap rates may yet rise further before settling, driving up interest rates further in the interim.
What is certain is that we’re unlikely to return to the low 1- and 2%s to which we’ve become accustomed. What would your household budget look like if you were paying 6% mortgage interest? It’s hard to swallow, but it’s a factor many homeowners will soon face as reality.
If your fixed rate is coming to an end, start your remortgage conversation early. Our brokers remain diligent in the face of these unprecedented measures and will always strive for the best result for you as an individual. Call them in confidence on 0208 421 7999 today.