Is Now A Good Time To Switch My Mortgage Rate?

Author: Samuel Beckingham
Updated: Jul 20, 2022
3 minutes read

On the 16th June, the Bank of England (BOE) raised the base rate from 1% to 1.25%. The Monetary Policy Committee (MPC) had to raise interest rates as the annual inflation rate sits at 9.1%, the highest it’s been in forty years.

The BOE is predicting that inflation will hit 11% by autumn and the market is expecting further rate hikes. By the end of 2023, it is predicted that the BOE will raise the base rate as high as over 3%.

When Should I Fix My Mortgage Rate?

With the BOE base rate at 1.25%, it might be time to consider fixing your mortgage rate to anticipate any future increases.

Even if you are currently locked into a fix-rate mortgage which is where the fixed period isn't due to expire for another six months, you could be eligible to apply for a cheaper rate which will start when your current deal ends saving you an early cancellation fee and potentially money in the long run.

As soon as there is any sign the BOE might increase the interest rates again, fixed-rate mortgage deals tend to increase their prices in advance, so if you want to try and secure the best offer, it could be beneficial to act fast.

How The BOE Base Rate Is Set

The MPC is a nine person committee within the BOE that determines the base rate. Around every six weeks the Bank will announce the MPCs interest-rate decision. A full schedule of decision dates and meeting minutes can often be seen on the Bank of England website.

These are then usually analysed by investors to see whether rates might go up and down in the future.

When Will Mortgage Rates Rise or Fall?

Usually this is when interest rates rise or fall, mortgage rates tend to follow suit.

Signs to Look Out For When Interest Rates Go Up Or Down

The BOE uses a number of indicators that determine whether interest rates will rise or fall.

Rise In Inflation

UK inflation now sits at 9.1% which is the highest it’s been in 40 years. This means that due to it exceeding the expected target of 2% along with the cost of living going up, the BOE has had to raise the interest rates up five times between December 2021 and June 2022 and will likely go up again soon.

No Support For Low Rates

In June, the MPC had a split decision with 6 members voting for a 0.25% interest rate rise while 3 voted for 0.5%. Due to the majority vote, the base rate rose from 1% to 1.25%.

Rise In Unemployment

Strong employment numbers increase the chances of an interest rate rise as do rising wages.

The Best Way To Look For Mortgage Options

Most people assume that using a price comparison site is the best way to remortgage. However, there are a few things to consider:

  • Many mortgage offers are only available via mortgage advisors and therefore don’t appear on price comparison sites.

  • Price comparison sites don’t take into account your personal circumstances or credit score which will decide whether a lender will actually offer you the mortgage deal.

That is why it might be better going with an independent mortgage adviser who will be able to give you all the advice you need to make an informed decision and potentially get you a better rate or product rather than going with a price comparison site.

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