Experts Say Remortgage Rates Will Be Much Higher the Longer Interest Rate Goes Unchanged
Remortgage rates in the months ahead may be much higher the longer the Bank leaves the interest rate unchanged. The Bank of England’s Monetary Policy Committee (MPC) is due to meet this week and decide among other things if the standard base interest rate will be increased or sit unchanged. Most economists believe that April’s meeting will result in no increase but May is likely. Others believe the economy is so fragile that a rate increase will be delayed until late Summer or early Autumn.
Homeowners should be aware that while this means a possible delay in the change of the rate, that once it does change it may be much higher than expected. Currently the suggested rate increases by MPC members have been as low as 0.25 per cent to as high as doubling the rate with a 0.5 per cent increase. One MPC member, Andrew Sentance, has long argued that the longer the wait for an increase the higher the first increase will have to be to control inflation. Now instead of "When will there be a rise?" the big concern will change to "How much of an increase?" and homeowners need to understand what a rise will do to their mortgage payments. Homeowners will have to balance the fact that they could remain on a lower rate while it goes unchanged but waiting could cause them to miss out on a good remortgage opportunity. Current remortgage deals are based on the Bank’s 0.5 per cent rate. Once the rate increase does occur a homeowner could be faced with remortgage deals that are double or triple the current rate or more.