There are homeowners not on a fixed rate mortgage that are going to be feeling pressure to search for a remortgage now that analysts are predicting an increase in the base interest rate. The forecast is for a rise in the current rate of 0.5 per cent to a level of 1.25 per cent by year’s end. With the recent increase in inflation for January to 4.0 per cent the pressure has been applied that a rate change is not far off and a remortgage may need to be sought.

The fixed rates are not as attractive as they were six months ago. Swap rates, which are the rates lenders charge one another to borrow money, have increased and that cost has been passed along to the borrowers. The average for fixed rates has increased in just the past few weeks and therefore what was available months ago is no longer an option to homeowners.

In addition, it can be shocking for homeowners that are sitting on low variable rates to view a fixed rate remortgage as a good deal. There seems to be a lack of clarity when it comes to understanding that fixed rate levels will not equal what some variable rates are at this time. Yet looking at what could happen with a rate increase can quickly bring about reality as a variable rate is compared to a low secured fixed rate.

While analysts are predicting an increase to 1.25 per cent for the year, there is no guarantee how high the base rate can go. In October 1989 the base rate was at 13.88 per cent. So, historically a rate of 1.25 per cent is still very good even if it isn’t 0.5 per cent. When shopping for a remortgage it is important for a homeowner to take into consideration that fixed rates carry with them security in a steady mortgage payment despite increases to the interest rate and there lies the attractiveness of a fixed rate in a fragile economy. It also pays to consider that a fixed rate offers will not compare to the variable rates some homeowners currently have on their mortgage.

For some staying on their bank’s variable rate is smart, even with forecasted rate increases. However, for others the risk is too much and a fixed rate is an attractive alternative. Remortgage fixed rates are disappearing though and it would do well for a homeowner to shop quickly.

Unbiased.co.uk recently released a report that revealed first-time buyers and those remortgaging were unrealistic in their expectations, with one in six looking for a deal of 2% or even less.

Karen Barrett, from Unbiased.co.uk, stated: "Homeowners' ideas of what is a reasonable fixed-rate mortgage have become distorted in the low-interest rate environment, and they need to ensure that their mortgage expectations are realistic."