The forecasts concerning the peak of inflation as well as the possible peak of the Bank of England’s standard base interest rate has been wavering rather than holding. In other words, no one can predict for sure what is ahead. At one point, only a few months ago, it was thought the base rate set by the Bank could reach 6% or higher. More recently it was predicted the rate could perhaps be at its expected high. Now, that is not so certain, and the Bank of England’s Monetary Policy Committee (MPC) could possibly have many more rate hikes ahead. This is not good news for borrowers, including home buyers and homeowners.

The ability to predict the decisions of the MPC is difficult. The rate is raised or lowered based on various economic factors. It is typically influenced by inflation trends, economic growth, and job figures. The MPC will usually monitor these factors closely and adjust interest rates accordingly to maintain price stability and promote sustainable economic growth. It should also be noted that decisions on the base rate can be influenced by a wide range of unpredictable external events such as global economic shocks, political events, and natural disasters.

Inflation is the persistent increase in the prices of goods and services in an economy. As prices increase, the purchasing power of the currency decreases, and the cost of living increases. Inflation can be caused by different factors, such as an increase in demand, supply shortages, or changes in government policies. To combat inflation, the MPC will often raise the interest rates to combat spending and to lessen pressures on supply of goods and services or the economy could face more difficult challenges.

When inflation occurs, it can have several negative effects on the economy. It erodes the value of money, making it more expensive to purchase goods and services. This could lead to a decrease in consumer spending and a drop in economic growth. Additionally, inflation can hurt businesses by increasing the cost of production, which can lead to lower profits and loss of jobs. Also, inflation can lead to social stress and political instability as people become dissatisfied with the rising cost of living and their difficulty in caring for their families.

Rather than let inflation continue and cause issue, the MPC will often raise interest rates. It can help because interest rates are the cost of borrowing money, and when they are high, it becomes more expensive to take out loans. This can discourage consumer spending and business investments, which can reduce demand and slow down inflation.

Raising interest rates can combat inflation by reducing the money supply. When interest rates are high, it becomes more expensive to borrow money, and people are less likely to take out loans. This reduces the amount of money in circulation, which can slow down inflation. 

Rising interest rates basically combat inflation by reducing consumer spending. When interest rates are high, it becomes more expensive to borrow money for purchases, such as mortgages, car loans, and credit card debt. The higher costs involved in borrowing can discourage consumers from spending money, which can reduce demand and slow down inflation. Additionally, higher interest rates can encourage people to save more money, which can also reduce demand and slow down inflation.

Increasing the interest rate can be helpful, but there is a delicate balance the rate setters are trying to reach. While hiking the base rate could be helpful in combating inflation, it could also have a negative impact on the economy. Higher interest rates make it more difficult for businesses and consumers to borrow, which slows inflation, but it could reduce economic growth and possibly cause a recession.

On the consumer level, higher interest rates can hurt people who have large amounts of debt, such as mortgage debt, auto loans, and large credit card debt. When interest rates are high, the cost of paying the debt increases, which can lead to defaults.

This is a concern for homeowners. Those that are coming to the end of their current mortgage deal will likely be leaving behind a much lower rate and are facing paying a higher one. At the start of the pandemic when lenders were offering historically low rates, many home purchases were made. Choosing a fixed rate deal would have shielded the homeowners from the rising rates. However, when their mortgage term ends, so does their lower interest rate. 

Paying an historic low rate and then facing one that is higher than in over a decade could be a financial shock. Depending on the level of debt, it could lead to a substantial increase in monthly repayments.  

Rather than pay more than necessary, and to lessen the shock of higher interest rates, homeowners are being encouraged to consider a remortgage and shopping for one is easy online. By obtaining quotes, the homeowner could discover what opportunities are available. It is certainly less risky to remortgage than allowing a mortgage term to end and the lender move the loan to their standard variable rate (SVR).

A remortgage is usually a lower rate than with a SVR. A homeowner could also choose a fixed rate deal to lock the rate in and avoid any future rate hikes. Currently, fixed rate deals are the most popular choices of homeowners.

It is easy to shop online for a remortgage by going to a lender website. A quote could be obtained in only a few minutes. Going to other lender sites offers the homeowner the ability to review and compare quotes. Shopping online with a remortgage broker is a one stop shopping experience as they could offer many quotes from a variety of lenders. Brokers often have exclusive deals available as well.

The next MPC meeting is days away, and it is unknown if the base rate will be increased or allowed to remain steady. Also, forecasts are not as positive that inflation may have peaked and will not require more rate hikes throughout the year ahead. Therefore, homeowners may be facing higher rates than expected. The possibility of lessening financial strains should be all the motivation needed to shop for a remortgage and find some relief for the household budget. Doing so could save money and offer peace of mind.