Do you fix it or track it?

interest rates
Do you fix it or track it?
User Rating: 4.5 (4 votes)

The Bank of England base rate was at 0.50% from March 2009 to June 2016.

It was reduced to 0.25%, August 2016.

And it was increased back to 0.50%, November 2017

Question: Where do you see the Bank of England base rates in 2018?

If there is one thing I am 100% certain of, it is that there will be areas of uncertainty. No one has a crystal ball; as an example, very few people predicted the global crisis in 2008, that the UK would vote to leave the EU or that Donald Trump would become President.

For those of you looking to remortgage, the killer question you need to ask yourself going forward is simple: Where do you see interest rates going in 2018? If you think they are going to increase after the election, then naturally you will be inclined to opt for a fixed rate. If you plan on living in the property for the next five years, then a five year fixed rate product (albeit the most expensive of mortgage products) will be top on your list.

If you like the option of having a budget and knowing what your monthly payments will be for a defined period, then a five year “insurance policy” fixed rate achieves that objective.

Interest rates are at an all-time low, but once they begin to creep up, then lenders will increase their rates accordingly. Not only that, they will tighten their lending and affordability criteria with stress tests at 8% +, thus making it more difficult to secure a mortgage. As a result, people are forced to stay with the same lender until their income/circumstances improve or wait for the next relaxed lending credit cycle.

If base rates do increase by 0.25%, could you afford the increased mortgage costs? Do you have savings, such as ISAs, that can tide you over during the period?

The truth of the matter is, it will take someone with much finer brains than mine to predict where base rates will be by the end of 2018.

So, if you are about to remortgage, you need to ask yourself how an increase in interest rates will impact your standard of living, and if you are not an economist and you want peace of mind as opposed to constantly analysing the global economy, then the only option is to consider a fixed rate and keep your fingers crossed that whatever happens to planet earth, you will come out on top.

 

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

The Financial Conduct Authority does not regulate most types of buy to let mortgages, bridging loans, development loans and commercial loans.

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