The Bank of England base rate remained at 0.5% after the Bank of England met in March. As most of the lenders have low variable rates currently, many people are just staying on their lenders standard variable rates for the time-being, something unheard of only a couple of years ago. In fact, the standard variable rates are so competitive that most lenders have withdrawn them from the market for new borrowers. Only those already with the lender can take advantage of the lower rate, normally when their initial rate period ends.
This is OK for the moment, but what happens when rates start to increase again? People are fine when rates are low, but they won’t feel so happy when their payments start to increase. Bear in mind that you will have settled into your lower budget, so an increase could have quite an impact. With the Bank of England under pressure to increase the rates, many people are starting to feel uncomfortable on their variable or tracker rates, wondering when the first increases will occur.
There are many differing views on this. The number of people in the Monetary Policy Committee voting for an increase has gone from one to three over the past few months. This has led many to think that an increase will come sooner rather than later. Then, we get shock news of the tsunami in Japan. Many predict this will mean rates staying lower for longer. Economists can never plan for such sad and catastrophic events.
If you wish to fix your rate, timing is crucial to ensure you get the best deal. Not only that, you should compare the whole of the market and gear your new mortgage to your own personal situation. You may want flexible options, some fixed rate mortgages allow overpayments, others do not. Depending on the size of your mortgage it may be worth paying a higher fee to secure a slightly lower rate, this can save you pounds over the term of the fixed rate. If you have a smaller mortgage, then a fixed rate with a low fee might suit. All of this needs to be calculated and compared.
It is also crucial that you apply to the right lender. Every lender is surprisingly different in how they lend, this is even more pronounced in the current market. This is a time when lenders are turning people down for even the slightest of things. There is no flexibility, and the lending policy needs to be scrutinised before you make your application. Differences in lending policy can range across a number of areas including assessment of your income and affordability, checking out any debts or other mortgages you have, your work situation and your dependents.