Inflation is rising… and interest rates are following suit
Homeowners have been warned against leaving mortgages untouched as official figures show that inflation rose by 7.0% in March, the highest rate in over 30yrs.
In recent years, with bank interest rates being at record low levels, those borrowers without a product, sat on either tracker rates or standard variable rates, have been quids in, paying virtually no interest.
Now, post-COVID as the government wrestle to maintain the British economy, rates are increasing. The Bank of England Base Rate of interest was increased to 0.75% in March, 0.5% higher than where it had been in November 2021. For many, habits of inactivity are beginning to bite and leaving expensive tooth marks.
Act now to lock-in a low contractor mortgage rate
“Over the past few years, ‘legacy’ borrowers, that is anyone who has had the same mortgage product for many years, often variable rates; have been far better off” says Andy McBride, director at Professional Contractor Mortgages. “Thanks to surging fuel, utility and food prices however, inflation is spiking, causing interest rates to follow.”
“A rate increase of 0.5% will add £500 per year per £100,000 of borrowing overnight. For those who understandably have their hands full with many other concerns at present, this will come as a sharp shock.”
Many banks begun to increase product rates from the beginning of 2022, and they continue to rise, with contractor friendly Clydesdale Bank this week announcing an increase of 0.37% across both 2 year and 5 year deals.
There is, however, a preventive measure that borrowers can take to safeguard against increases having an even bigger impact than currently.
How contractors can future-proof their mortgage
“While rates have clearly increased this year, there is always a lag between ‘real world’ finances such as inflation feeding into mortgage rates” continues McBride.
“As a result, there are still some incredible value fixed rates on offer that mean any increase in outgoings can be stabilised.”
“Do not delay, however, speak to one of our specialist consultants today to see how you can future proof your mortgage.”