With Britain’s economy growing faster than expected in the third quarter of the year, according to the Office for National Statistics, the likelihood of an interest rate rise at the Bank of England’s meeting next week has increased. But what does this mean for borrowers?
Whether the base rate rises or not is largely academic, as the expectations of higher interest rates have already filtered through to mortgage pricing. Many fixed-rate mortgages have already become more expensive with most lenders increasing the pricing on some, or all, of their product ranges.
However, it is not necessarily as straightforward as that. Challenger lender Metro Bank this week reduced its five-year fixed rate for up to 90 per cent loan-to-value deals by 10 basis points to 2.54 per cent. At the same time, the lender marginally increased pricing on two- and three-year fixes, while five-year fixes at 65 and 70 per cent LTV were withdrawn. It is clear which areas of business the bank is keen to promote.
Another lender, TSB, increased rates by up to 0.2 per cent on seven of its fixed-rate remortgage deals and removed its three-year fixed-rate deal at 90 per cent LTV.
As lenders jockey for position, independent advice is more important than ever. There is no need to panic as the rate increases we have seen so far have been relatively modest but equally borrowers should not hang around, particularly if they need the security of a fixed rate to help with budgeting.