The bank of England has raised its base rate once again from the May 2023 heights of 4.25% - 4.50% which saw its highest level in 14 years, to the now proposed base rate of 5% under the BOE 22nd of June 2023 review and decision to ensure it’s keeping in line with inflation.
With only a month between the 0.5% hike in the BOE base rate, the earlier prediction of an end-of-year base rate at 5.4% is now predicted to reach a staggering 5.75% as rates continue to soar.
This means that at present, many mortgage holders can expect rates to rise further given the ruling.
Based on the MPC's summary last Thursday, the committee noted, "There has been significant upside news in recent data that indicates more persistence in the inflation process, against the background of a tight labour market and continued resilience in demand,"
"The MPC will continue to monitor closely indications of persistent inflationary pressures in the economy as a whole, including the tightness of labour market conditions and the behaviour of wage growth and services price inflation. If there were to be evidence of more persistent pressures, then further tightening in monetary policy would be required."
Should you fix your mortgage rate now?
With the BOE base rate 5% and the market pricing increasing you should consider fixing your mortgage if you have concerns over high interest rates and whether these increases will affect your ability to pay your mortgage repayments.
If you’re currently on a fixed-rate mortgage where the period isn’t due to expire for the next 6 months it will be possible to lick in a cheaper rate now, that will begin when your current fixed-mortgage rate ends, potentially avoiding any redemption charges from your existing lender.
How does the Bank of England set the base rate?
The Monetary Policy group (MPC) is a nine-member group within the BOE that sets the base rate. The bank usually announces the mpc's interest rate decision every six weeks. When a decision is made, the minutes of the mpc meeting are also made public.
Investors closely examine these minutes for any hints about when interest rates might rise or fall. For example, they might look at how many members of the committee voted for interest rates to rise, fall, or remain unchanged.
The predicting of the Bank of England's base rate has changed in recent years. Former Bank of England Governor Mark Carney established a fictitious relationship between the UK unemployment rate and the BOE base rate before it was replaced by the current model of 18 economic indicators.
How to know if you’re already on the best rate?
Finding the greatest mortgage arrangement necessitates thorough study and consideration of aspects other than the interest rate.
Individuals can improve their chances of receiving a mortgage that meets their needs and offers favourable conditions by researching multiple lenders, visiting mortgage brokers, and comparing costs and terms. Here's a detailed guide to help you get the most out of the procedure.
Conducting extensive mortgage deal research
To ensure you're getting the most favourable mortgage deal, it's crucial to invest time in researching available options. While convenience may tempt you to settle for the first lender you come across, exploring different lenders and their offerings is essential for comparison purposes.
Avoid limiting yourself to your bank
Although your bank might seem like the obvious choice for a mortgage, it's essential not to limit yourself solely to this option. Other lenders may have more competitive rates and terms that align better with your financial goals. Consider exploring alternative lenders to maximise your chances of securing the best deal.
Examining fees and charges
Beyond interest rates, carefully analysing the fees associated with a mortgage is crucial. Early repayment charges and exit fees can significantly impact the overall cost of a mortgage. Therefore, it's essential to assess the fee structure of each potential lender before making a decision.
Understanding the factors beyond interest rates
While interest rates are undoubtedly important, they should not be the sole determining factor when selecting a mortgage. Other considerations, such as loan terms, flexibility, customer service, and repayment options, also contribute to the overall cost and suitability of a mortgage.
Leveraging the expertise of mortgage brokers
Engaging a reputable mortgage broker can be invaluable in finding the best mortgage deal. These professionals possess extensive knowledge of the market and can provide guidance tailored to your specific financial circumstances. A mortgage broker can identify lenders more likely to approve your application and present you with options offering the best overall terms.
Essential requirements for remortgaging
To proceed with a remortgage, certain documents and information will be necessary:
Valid identification, such as a passport or driver's licence.
Recent bank statements covering 3-6 months, including savings account statements if your deposit is held there.
Details of your current mortgage.
Your credit report.
Proof of deposit funds and their source.
Stable and verifiable income.
For self-employed individuals, SA302 tax documents from the past 2-3 years (although some lenders may accept just one year).
Consider locking in rates in advance
For those concerned about potential rate increases, some lenders offer the option to lock in a rate between 3-6 months in advance.
This feature allows borrowers to secure favourable rates for a future remortgage, offering protection against potential interest rate fluctuations. However, it's crucial to carefully compare options and consult with a reputable mortgage broker before committing to this strategy.
Importance of personalised mortgage advice
While comparison sites provide a quick snapshot of available mortgage deals, they often lack the comprehensive information necessary for an accurate assessment. Opting for personalised advice from a mortgage broker, either through face-to-face meetings or phone consultations, enables a thorough evaluation of your specific circumstances.
This approach ensures access to lenders more likely to approve your application and offer better mortgage terms, allowing you to take advantage of today's mortgage rates tomorrow.
What to do next for mortgage holders?
Knowing your next steps is important as this can potentially shield you from some of the impact of increased base and interest rates, below is where you can begin your next steps.
Calculate the impact of the Base Rate on your monthly repayments
Find out what mortgage options are available to you
Knowing what you can do to ensure that best mortgage rates for you with lower increases to your monthly payables is a must, The Mortgage Hut are well equipped in helping you find the best deal for you. Contact the team today for much-needed advice to help prepare yourself for further base rate increases throughout 2023.