The Bank of England has warned that interest rates may have to rise more quickly, and perhaps more steeply, than markets had thought. Subsequently, the majority of City analysts now expect a rate rise in May, with some expecting interest rates to rise to 1 per cent by the end of this year.
However, despite this hawkish turn, there is no need for borrowers to panic. At the same time as making the above comments, Governor Mark Carney also suggested that a return to normal interest rate levels of around 5 per cent, may never happen. And mortgage rates are still at record low levels, which means there has never been a better time to fix your mortgage. Five-year fixed rates can be secured at around 1.7 per cent and represent better value than shorter terms deals for borrowers whose circumstances are unlikely to change in the near future. Although shorter term fixes and trackers are more competitively priced, the benefit is likely to be short lived with the need to re-finance again in a climate of rising rates.
The problem may arise for those borrowers on their lender’s standard variable rate who can’t remortgage elsewhere. With lenders such as Santander introducing lower SVRs for new borrowers there is a case for arguing the toss for being allowed to move onto a lower rate in the interests of ‘treating customers fairly’.
Whatever your situation, seeking advice is crucial.