In December, the historically low interest rate of the Bank of England disappeared, perhaps, and we would actually hope, forever. Very low interest rates are a sign of economic difficulty. The UK economy has been negatively impacted in the last few years with a recession, Brexit, and a global pandemic. The war in Ukraine will now be putting pressure on the economy. The many factors of the pandemic have had an economic impact causing a rise in inflation and while all consumers should beware, homeowners should definitely be taking notice.

As mentioned, the interest rate in December 2021 was at an historic low. It was at 0.01%, almost zero, and the lowest in over 300 years of the history of the Bank of England (BoE). Due to the pressure of inflation, the BoE’s Monetary Policy Committee (MPC) chose to increase the standard base rate to 0.25%. The next meeting was in February, and again the MPC voted to increase the rate. In a few short months the rate had increased to more than double at 0.50% from what it was in December. 

The vote in February to raise the rate to 0.50% did not include all members, as some had actually sought to increase it higher to 0.75%.

The next meeting is 17 March and most experts believe another increase will occur. It could be increased another 0.25% as before to 0.75% or the MPC could follow those seeking to take a more assertive action and increase it to more than 0.75%.

Homeowners are being warned to prepare for higher interest rates through this year and into next. In fact, rates should remain higher even as inflation dips. It will be a sign that the effort to control the economy and help consumers was successful and that the economy is doing well. The deep low interest rates of the last few years were unusual no matter how long they existed and how normal they seemed after so long.

Homeowners should take a second look at their mortgages. They should be aware of when their mortgage term will end and make smart financial decisions to save money. Rather than pay more than necessary, homeowners should consider a remortgage. 

When the term of their mortgage ends, a homeowner can allow their loan to be moved to their lender’s standard variable rate (SVR) or choose a remortgage. The SVR is a risky choice as it fluctuates according to the quick actions of the lender. For instance, currently the rates will increase quickly as the MPC takes action and homeowners will face higher repayments. With a remortgage, a homeowner could discover a lower interest rate and save money.

Not only could the homeowner choose a lower interest rate and save, but they could choose a fixed rate remortgage and lock in the lower interest rate for years to come. This would offer a savings from the lower rate and offer a safety net against rising rates of the future.

Shopping online is fast and easy and allows a homeowner to discover what deals are possible. Going from lender to lender’s websites can be done quickly and offers quotes to the homeowner. Visiting a remortgage broker is a one stop website that offers quotes from a variety of lenders to compare. By getting quotes, the homeowner could be motivated once it is realized what savings could be had. 

Due to warnings that many more interest rate increases could happen in the near future, homeowners should take action to shop for a remortgage as soon as possible. The savings offered could be the best motivation and be the best preparation for the higher interest rates due to come.