For the first time in 10 years, the Bank of England has opted for an interest rate rise. It is as much symbolic as it is significant. Whilst there have been some growing signs of an economic recovery, it is perhaps rising inflationary pressure that has led Mark Carney and the governors of the Bank of England to vote in favour of a rate rise from 0.25% to 0.5%.
Economists anticipate the modest rate rise will have a negligible impact on homeowners in the short-term. Some 57% of homeowners with a mortgage are on fixed-rate deals, with just 11% on a standard variable rate (SVR). For the average homeowner with an SVR mortgage, monthly payments will rise by a modest £20 or so. However, it is perhaps the long-term direction of interest rates that has led to some activity in the mortgage market, movement in the value of the pound and a surging of the FTSE 100. Many experts believe that this is the start of a trend towards higher interest rates in a bid to stabilise inflation, and put the brakes on cheap borrowing.
There is some buoyant news in the employment market, too. Unemployment is down to a record low of 4.3% and there are signs that wages are increasing, albeit slowly and not at the same rate as inflation. UK wage growth was 2.1% between May and July 2017, in comparison to the RPI measure of inflation, currently running at 3.9%. This disparity in wage growth and price rises has led much of the debate about “real wages” and how many families are struggling to make ends meet.
On the other side of the argument, a rise in interest rates is good news for those with savings, who have gained virtually nothing from savings pots. It is also good news for those approaching retirement and considering the purchase of a pension annuity.
For homeowners, the long-term impact of an additional interest rate rise will mean that monthly payments will increase at some point. For those homeowners locked in to a fixed mortgage deal, the security of a fixed price gives families the opportunity to budget for the long-term. Daniel at Grange Mortgages recommends his customers look to find a good-value fixed-rate deal: “The signs are there that interest rates are heading in only one direction for the foreseeable future. But the cost of borrowing is still at a record low and there are still some excellent deals to be had on both tracker and fixed-rate mortgages. For added security, our mortgage protection options are a great investment.”
If you’d like to speak to an expert at Grange Mortgages, call through to the team on 01604 877999 and we’ll guide you through the process.
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