subject: The Window Is Fast Closing On Remortgage Options As Interest Rate Rise Draw Closer [print this page] The Window Is Fast Closing On Remortgage Options As Interest Rate Rise Draw Closer
The Bank of England have been talking around interest rate increases again after recent news of inflation increasing - it is now reported to be at a whopping 4% which is the highest in a long time. And the reason is the rocketing costs of consumer goods and fuel. With all of the recent financial changes, many borrowers are unsure if now is a good time to remortgage.The pundits out there say we should expect an interest rate rise with the six to twelve months. The Monetary Policy Committee headed by Mervyn King (who are responsible for setting rates) have little or no choice but to at some point increase the rates from their historic low of half a percent or so. Any postponement we see over the next few months can only be seen as temporary, they are more than likely going to go up!It is reported that interest rates will see an increase by approximately 0.75% around the end of this year, and while although this is still low compared with historical interest rates, borrowers who took on fixed rates of over 5% before the interest rates were decreased will still be very jealous of the new rates on offer. But will interest rates continue to rise or will they come back to our current low? One thing to understand is that inflation in the UK isn't currently being caused by the spending in the UK at all, so increased interest rates won't affect inflation at all in this country. So could this be an opportunity for the Monetary Committee to pay about with rates?In a nutshell the answer is no. The monetary committee commonly stick to a plan, either to increase slowly and see the effects over time of decrease and do the same. They won't (from historic experience) put it up then down and continue like a rollercoaster. This does the economy no good. The general consensus is that people are saving again and to encourage it, a slow increase in interest rates will keep them interested in saving which will help our economy to recover. So it is very likely that we'll see increases continue over the next few years.When interest rates are expected to rise the demand for fixed rate mortgages normally increases. This is because borrowers want to benefit from protection against increasing mortgage rates. However, will there be plenty of fixed rates available in the market?Fixed rate mortgages are not going to be so popular with lenders though, now that they know that the interest rates will increase as they know they'll lose out unless they make it worthwhile for them by either adding on a whopping product or application fee, or setting the interest rate affair bit higher than the base rate. Even if the base rate is low there is nothing stopping the banks from increasing their interest rates for fixed mortgages.As fixed rates (especially in climates like what we're in now) are so popular, the cost of taking out a fixed rate mortgage is steadily increasing, and so the cost of borrowing to the mortgage lenders themselves is increasing too. Many lenders are also closing many of their fixed rate deals to new business, because they know what's coming and they don't want to lose out by offering low rates when rates will increase in the next few months.Many of the lenders are also issuing notices to borrowers and potential borrowers making them aware that they can change their deals without issuing notice. Of course, they are businesses and so they are looking out for their profit margins. If they won't make money going forward, they won't offer the product. This does not, however, mean that fixed rate mortgages won't be available. It just means that the current lower rates will be removed and new ones will be introduced with slightly higher interest rates. It all depends on what the market is doing, as fixed rates will always be higher than the Bank of England's base interest rate anyway in case of any sudden increases.So now that you understand the background, you'll see that if you intend to remortgage, now is the time for action as you're more likely to get the lowest rate now before interest rates increase. What are you waiting for?
