|
Like the British weather, interest rates are unpredictable, uncontrollable, and affect our daily lives. Depending on what the Bank of England decides, interest rates can increase or decrease our monthly variable rate mortgage payments (and therefore affect the quality of our lives). While interest rates are currently very low, they will not stay that way forever. We’re going through an unpredictable patch in the U.K. right now, so is it time to get out our brollies, or put on our shades? Currently, the Bank of England’s (BoE) Monetary Policy Committee (MPC) is keeping interest rates at a historically low figure of 0.25 percent, as it tries to do battle with the depreciating pound and the aftermath of the 2008 financial crisis. The decision on interest rates is made every Thursday and - with the vote split in recent weeks - there’s no guarantee as to how long they will stay this low. For those homeowners with fixed-rate mortgage deals, changes in base rate interest do not mean anything. However, if you’re borrowing on a variable rate, depending on which way the change in interest goes, that could either be great or bad news for you. If your mortgage tracks the base rate and there is a fall in interest, you will also see your monthly repayments fall. When the base rate was first cut to 0.25 percent in August 2016, average variable rate homeowners paying 2.86 percent on a mortgage of £150,000 saw monthly payments drop by £19.68 per month. Those homeowners enjoyed an annual saving of £236.16 each year. While that’s not a huge amount, it’s definitely still better than a poke in the eye. Of course, interest rates being in the quagmire that they are, there are no borrowers left with their own tracker rates below that base set by the Bank of England. But that doesn’t mean that some aren’t experiencing the (few) benefits brought by the economic uncertainty and strife of the times we live in. Nevertheless, with interest rates lacking room to shrink much further, this means one of two things: either, interest rates will increase, causing mortgage repayments to increase for the first time in many years (something no one will be happy to see); or, if the BoE announces that they will turn interest rates negative, banks may issue charges. Unfortunately, that isn’t as farfetched as it sounds. When the base rate first hit this low last year, the Royal Bank of Scotland (RBS) wrote to business customers warning that they would have to impose charges if interest rates dropped below zero percent. Some recommend that while the BoE base rate remains small, if you can, it would be a good time to start making some over payments on your mortgage. In this way, you will start to take bigger and bigger chunks out of the mortgage that you owe, reducing interest payments at the same time. Reducing the overall sum more quickly also means that, should interest rates rise, you won’t be paying bigger fees on your loan overall. With fixed rate deals currently making up some 50 percent of all mortgages, the reality is that changing interest rates will not affect a great many homeowners, at least for as long as that rate remains in place. However, when that rate comes to an end, there is absolutely nothing from stopping you from hunting for a better deal with a different lender - just make sure you do all of your homework beforehand. If you’re unsure as to how much interest changes might positively or negatively affect you, you can also search online for a range of nifty calculator websites and tools that can work out the exact difference in price for you. Staying informed as to what is happening, and when, is of the utmost importance in navigating interest rate changes. So keep your eye on the news and you won’t be taken by surprise. Track your mortgage online at Mortgage Watcher
Related Articles -
mortgage, remortgage, mortgage application,
|
