What the Bank of England rate rise means for you
The Bank of England has raised the base rate from 3.75% to 4%, the first increase in three years. The decision was unanimous and widely expected. The Bank is aiming to bring inflation, which rose to 3.5% in September, back towards its 2% target.
It's natural for a headline like this to give you a moment's pause. But a rise in the base rate doesn't mean moving plans need to go on hold. Here's what it actually means if you are buying, selling or remortgaging, and why the right advice can make all the difference.
Lenders have already moved
Mortgage lenders don't wait for the Bank of England. Fixed rates are priced on where the market expects rates to go, so much of today's rise was already built into the deals on offer. According to Moneyfacts, the average new mortgage rate now stands at 5.89%, only slightly up from 5.83% at the start of October. The average two-year fix is 5.97% and the average five-year fix is 6%. L&C Mortgages points out that because lenders raised rates in anticipation, a base rate rise may make little or no difference to fixed deals now available. It has also seen some recent improvements in rates, although it is too early to call that a trend.
The wider industry agrees. Zoopla's Richard Donnell notes that mortgage rates already reflect expectations of further base rate increases, so average rates are unlikely to rise significantly in the short term unless those expectations change. Jeremy Leaf also points to a recent price war that has prompted some larger lenders to reduce their rates.
In other words, the change people were bracing for has largely happened already. Buyers and homeowners can now plan with a clearer picture of what borrowing costs look like.
Buying a home
A fixed rate gives you certainty. Once it's secured, your monthly payment stays the same for the length of the deal, whatever happens to the base rate. First-time buyers with smaller deposits still have options too. L&C's figures show 95% mortgages remain available, and the right adviser can help you understand what you can comfortably borrow before you start viewing. Having a mortgage agreed in principle also puts you in a stronger position when you find the right property.
Timing could also work in your favour. Buyers who get mortgage advice and start looking now may find a better deal in the weeks before Christmas than in January or February, when demand usually picks up.
Selling your home
Interest rates are only one part of the picture. People still move for new jobs, growing families, schools and a change of space. What matters most is pricing your home correctly from the start, using local sales evidence, and marketing it well. Combined with buyers who have their finances in order, that's what keeps a sale moving. Zoopla's figures show the sales being agreed are happening just as quickly as a year ago, as serious buyers become more selective. Well-priced homes continue to attract interest.
If you are planning to sell in the new year, it's worth getting ready now. Photography, compliance checks and marketing all take time to arrange, so starting before Christmas means you are ready when buyers return in January.
Remortgaging
If your current deal is coming to an end, planning ahead is the best thing you can do. L&C notes that you can often secure a new rate up to six months before your existing deal finishes. That protects you if rates rise further, while still leaving room to switch if a better rate comes along before completion.
If you're on a tracker, your rate follows the base rate, so any change will feed through. If you are on your lender's standard variable rate, it's well worth checking what else is available, as you may be paying more than you need to.
Speak to us before you decide
Headlines tell you what's happening nationally. They don't tell you what it means for your home, your budget or your next move. Our independent mortgage specialists can look at your circumstances and talk you through the options available, whether you are buying for the first time, moving home or coming to the end of your current deal.
Thinking of selling? Book a free, no-obligation market appraisal at richardkendall.co.uk/valuation and one of our local valuers will give you honest advice based on recent sales in your area.
Or telephone any of our local offices to speak with the team.
Your home may be repossessed if you do not keep up repayments on your mortgage.
