The weeks have passed bringing the next Bank of England’s Monetary Policy Committee (MPC) closer to commencing. There was not a meeting scheduled in January, allowing borrowers to prepare between the December 2002 meeting and the next one on 2 February. The last nine consecutive meetings since December 2021 have resulted in a rate hike in response to growing inflation. The current rate is 3.5% after the last increase of 0.50%.

When the first increase of the nine past rate hikes occurred in December 2021, the rate was at almost zero having reached 0.1% in response to the global pandemic’s impact on the economy.

During that period of historically low interest rate offers, many home buyers secured a purchase with rates so low some offers had never been offered prior. Coming to the end of one of those mortgage terms will leave homeowners having to choose a new higher interest rate and for some it could cause affordability issues.

Moving from rates offered from lenders at historic lows to current offers could have homeowners paying hundreds of pounds more per month, if not more, depending on their loan.

When a homeowner comes to the end of their current mortgage term, they can remortgage to a new rate or be moved to their lender’s standard variable rate (SVR). A SVR is usually connected to a higher interest rate than a remortgage, therefore it is more expensive to be moved to a SVR. The variable element of a SVR means it is subject to further increases. However, with a remortgage, a homeowner could choose a fixed rate deal and be shielded from any further rate hikes by the MPC.

The forecast is for another rate hike in February and beyond. The state of the economy, namely the rate of inflation, will determine how the forecast is adjusted. It had been thought months ago that the MPC set rate would have to reach 8.0% or higher. However, the forecast has been adjusted to reach a possible peak of 4.8% before inflation is controlled. The February MPC meeting will result in an update on the state of the economy, including the inflation rate, and will provide important information as to what to expect in the near future.

Homeowners are encouraged to plan for even higher interest rate offers from lenders in the days ahead, which means preparing for higher repayments. There might not be choices from lenders that match what was available before the MPC started hiking the rates, but savings from paying more than necessary are available. For homeowners, a smart strategy could be choosing a remortgage rather than a SVR, and considering a fixed rate deal could offer further savings.

Shopping online for a remortgage provides quick information as to what deals are available. Visiting the website of a remortgage lender and obtaining a quote allows a homeowner to not only determine what is possible, but also allows for the homeowner to build expectations and prepare. Visiting many lender websites allows the homeowner to review and compare offers to find the best remortgage.

For a one-stop shopping experience, a homeowner could visit a remortgage broker website. By doing so, a homeowner could get quotes from numerous lenders to compare and review. Brokers often have exclusive deals which are not offered directly from lenders.

Currently, the most popular choices in remortgaging have been fixed rate deals and for longer term periods with homeowners favoring five-year terms. 

The expectation is another 0.5% increase from the MPC in February which will put the base rate at 4.0%. Homeowners have little time to prepare if they are on a SVR or close to having their term expire. Online shopping for a deal could offer information as to what is available and offer valuable information for planning or in making a choice to save money.