It’s not too late to fix your mortgage - Partners Wealth Management

With inflation surging upwards, reaching levels that have not been seen in around 30 years, and as the true cost of living increases due to the rising costs of energy and food, you may wish to retake control of one of your biggest outgoings and consider fixing your mortgage rate and securing a lower monthly payment.

The Bank of England’s (BoE) Monetary Policy Committee surprised economists by increasing the base rate by 0.25% at the end of 2021, and just six weeks later they increased it again, despite a steep rise in the costs of living costs.

The BoE is keen to prevent inflation rising, which it forecasts could reach 8% this Spring and average close to 6% throughout 2022. With inflation showing no sign of slowing down, many leading economists have warned that more interest rate rises will be needed to curb such rises, something many investment managers are now gearing up for. However, the latest decision was not unanimous, suggesting that some members of the BoE’s committee are not so keen on hiking interest rates further while the economy is still recovering from the impacts of the Covid-19 pandemic.

With a fixed rate mortgage, you can safeguard yourself from interest rate hikes for a set period of time. Remaining on a tracker or variable rate mortgage will see your monthly payments tick upwards, and the overall cost of your mortgage will keep increasing alongside the base rate.

Rates are inching upwards on an almost daily basis. For example, Virgin Money increased their rates three times over a two-week period recently. Alongside the rising costs of living overall, homeowners need to carefully consider the effect a 2% or 4% rise would have on their ability to afford a mortgage.

Should you fix your mortgage rate now?

The best fixed rate mortgage deals tend to rise as soon as there is even a hint of a base rate rise, so it is important to move quickly. Five-year fixed rates before Christmas were under 1%, and they are now over 2%, and it is predicted that they will continue to keep rising over the coming months and even years. More than 500 mortgage deals have been pulled by lenders in the last month alone.

As interest rate are still at historic lows, although considerably higher than before either recent base rate rises, homeowners do need to seriously consider locking into a longer-term fixed rate sooner rather than later. Homeowners can look at applying and locking into a fixed rate 7-8 months before their current deal is up as most lenders’ offers are valid for six months and the time it takes to get the offer stage can be managed to ensure it fits with these timescales of the end date of an existing rate. Do not leave this until 2-3 months before, as rates will most certainly be higher.

Some forecasts predict that the BoE’s base rate will be over 2% by February 2023, so we would suggest that this is something to prioritise, as locking in a lower interest rate deal could save you thousands over the longer term.

Should you fix your mortgage rate now?

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