08 Feb Another Interest Rate Rise
We knew that it was coming, but were any of us really prepared for such a rapid increase in the cost of living? In November, the government and Bank of England implied that there would be no increase in the base rate before Christmas after the initial increase from 0.1% to 0.25%; most people read between the lines that there was another increase on the horizon.
On 4th February (2022) the Bank of England doubled the base rate in order to curb this rapid cost of living. We have been inundated with enquiries about how this may affect our clients who are coming to the end of their mortgage terms. As independent mortgage advisors we have access to the entire range of deals so, if you need some help securing finance for your property, give us a call on 01753 439000 or email us.
Cost of Living
The Bank of England raising the base rate is actually a measure that should help to curb the rise in the cost of living. For many people, this rise will look like the opposite, especially in light of the news that energy prices are increasing. Borrowing money will become more expensive, while food prices, rents, and motoring costs all continue to creep up.
This is the tightest squeeze on household finances in 30 years and with inflation and the cost of living rising faster than pay, we’re in for a tough year ahead.
Inflation is predicted to average 6% in 2022 with its peak being in April at a massive 7.25%, more than treble the Bank of England’s normal target (of 2%). This period is being touted as a “one-off” shock, which will have positive ramifications further down the line; and should stop a spiral of inflation – but this is a tricky balancing act which will take time to heed results.
Borrowing in 2022
If your mortgage product is finishing this year we advise that you act early, there is no telling what will happen later in the year, and generally, you can look to secure a new mortgage product 6 months before it ends.
In 2014 new affordability criteria were brought in which forced mortgage applicants to complete a stress test to prove that they can pay at a rate of 6-7%. This demonstrated that while a small rate rise might be uncomfortable, it wouldn’t be unmanageable for homeowners.
As always if you are looking for a mortgage product and want to go it alone, make sure that you do extensive research. Our blog on the True Cost of Your Mortgage goes through some of the things you need to consider when looking for financing for your property.
Researching yourself is all well and good, but we regularly have clients come to us after trying to secure their own mortgage and getting into difficulty. Your circumstances are unique to you, having a human (rather than an online form) understand your circumstances immediately puts you on the front foot. We ensure that our impartial advice takes our clients’ best interests to heart.
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