Earlier in the month, the UK saw the first rise in the official bank rate for 10 years from 0.25% to 0.5%. But how will this affect homeowners with a mortgage and those looking to get a mortgage in the near future?
Mortgage Holders on a Variable Rate or Tracker Rate
Householders with a variable rate mortgage will see their mortgage payments increase as a result of the recent interest rate rise. According to the BBC, around 4 million mortgage holders will see a rise in their payments.
The Bank of England governor Mark Carney suggests there will likely be several more rises in the next 3 years so it could be a good time for those on a variable or tracker rate to consider switching to a fixed rate deal.
Mortgage Holders on a Fixed Rate Deal
Homeowners with a fixed rate mortgage will not be affected initially by the interest rate rise. They may, however, find that interest rates are higher than what they are paying now when their fixed rate ends.
With speculation about rate rises in the future, it would be advisable to shop around to find the right mortgage when you get to the end of your fixed rate deal. Despite the rise, depending on when you took out your loan you could still get a cheaper rate.
First Time Buyers
The rate rise will affect all mortgages, however the rise is only 0.25%. So, for example a 150,000 mortgage over 30 years at a rate of 2.5% would cost £593 a month, in comparison the same mortgage at a rate of 2.75% would go up to £612 - so £19 more per month.
A good mortgage broker with access to the best deals can find the right deal for you. Even with the rate rise, there are plenty of competitive deals out there for first time buyers. If you are worried about interest rate rises in the future you should consider a fixed rate deal for 2 or even 5 years.
The good news, for first time buyers saving for a deposit, is that we should see some better saving rates as a result of the interest rate rise.
Speak to The Mortgage Hut about your Mortgage Needs
Whether you are a current homeowner on a variable, tracker rate or a fixed rate mortgage nearing the end of its term, a first time buyer or homeowner looking to remortgage or move home - speak to an adviser from The Mortgage Hut for friendly, professional advice. We can assess your situation and talk you through your options. There may be a more suitable deal out there for you!