The UK is getting used to record breaking in the housing market and also in the lending market. As of late, the housing market has reached new highs again and again as house prices rose due to strong demand brought about by the pandemic. Also, last year, until December, borrowers had access to extremely low interest rates. The Bank of England’s Monetary Policy Committee (MPC) in response to the global pandemic lowered the standard base interest rate to the lowest level ever in over 300 years. 

Then in December, in response to growing inflation, the MPC raised the standard rate from the historic level of 0.1% to 0.25%. 

Thursday is the next meeting of the MPC. In yet another change in recent history, should the MPC increase the interest rate again as is expected, it will be the first back to back increases since 2004. 

The expected rate change is for it to double to 0.5%. For borrowers, especially home buyers and homeowners, it could mean a burden on one’s dream to climb onto the property ladder and a burden on the household budget due to higher repayments. Homeowners that have had their mortgage deal end without a remortgage and were moved onto their lender’s standard variable rate (SVR) are at high risk as they will likely see a quick increase in their interest rate costs.

Due to the fact an interest rate determines the cost of borrowing, for a homeowner on a lender’s SVR, their cost could be rising and it might not be the first increase in costs for them this year. 

To avoid paying more than necessary, experts are encouraging homeowners to shop for a remortgage. Online shopping is quick and easy. Homeowners can visit remortgage lenders’ websites to obtain quotes, or they can do one stop quote searches by visiting a remortgage broker’s website since they work with many lenders. They could also have exclusive deals for clients not available directly from lenders.

Considering the Bank’s rate was at 0.1% in December and could be 0.5% by the start of February, and that more rate hikes could be on the horizon due to inflation, experts are offering smart strategy for homeowners to remortgage. 

For hopeful home buyers, the move to buy has many considerations. On the one hand, securing a low interest rate now could save costs against buying later on should rates continue to rise. However, as rates do rise, demand in the housing market could decline and house prices as well. There might be more choices and more considerations for buyers versus homeowners that could very well face higher repayment costs.

The expectations are high that the MPC will indeed change the standard base rate this week, and for those that will be impacted negatively by a higher rate the time is right to take action to lessen the impact, especially since warnings suggest the next rate hike won’t be the last.