The Bank of England has once again announced an increase in interest rates. The 3rd in 4 months. If you are putting off reviewing your mortgage or you are coming off a special rate in the next few months then now is the time to act. Analysts are predicting worse to come.
Whilst I usually prefer to stay away from posting about events at the moment on this blog, I felt it warranted on this occasion. The Bank of England has increased interest rates for the 3rd time in 4 months. Until November 2021 the rate was 0.10%. Today it is 0.75%.
Analysts being analysts don't always agree. However, the general consensus at this time amongst most is that more is to come. By this time next year, the expectation is that the rate will have increased to at least 2% with some predicting up to 2.5% by the end of 2023. The last time rates were as high as 2% was in 2008.
The message is clear, worse is to come and it's is not going to be a short event. You can keep up to date with current and historic rates here.
If rates do increase as predicted then it will be a disaster for mortgage applicants. As a result of affordability rules, all lenders have to test borrowers' ability to meet affordability if the rates were higher than they are now. Currently, that is 3% above a lender's standard variable rate in most cases.
The average affordability rate across a range of lenders today is about 6.5%, so no matter how much lower the actual rate is, borrowers must demonstrate they could afford the payments in the rate was as high as 6.5%. Add a further 2% to make it 8.5% and many will not be able to borrow, or at least less than they could today.
There is some change in progress, the Bank of England is considering changes to this affordability test. See here. But that may come too late for many.
If you are on a variable rate or coming to the end of a fixed, capped, or other special deal with your current lender, you should look at what options you have to take out a new deal that provides some certainty for a period of time whilst this difficult period rumbles on.
Having worked in the mortgage industry for over 20 years I have always wanted to build a website dedicated to the subject. Also being a geek when it comes to the internet all I needed was time and I could both build the site from scratch and fill it with content. This is it!