Interest rates on remortgages can be quite confusing these days.  The interest rate set by the Bank of England’s Monetary Policy Committee (MPC) has remained the same now for over three years.  The standard base interest rate was 0.5 per cent last year and will remain the same this month until at least the next meeting in May.  Most economists believe the 0.5 per cent rate will remain throughout the entire year without any change.  This is why homeowners can be confused when they go looking for a remortgage and find interest rates changing.

It can also be confusing for those homeowners that have had their current mortgage deal end and have converted to their lender’s standard variable rate.  They erroneously expect their lender to leave their own rate set as long as the MPC leaves their rate steady.

The truth is that lenders set their own rates independent of the MPC.  If lending becomes expensive then the cost is shared with borrowers.  Many lenders have been putting out notices that they are going to be raising their variable rates.  This means that even though the MPC has raised their rates homeowners on their lender’s standard variable rate will be seeing an increase and possibly more than one.

There are many reasons for the change in remortgage interest rates which include a lack of confidence lenders have in the economic recovery, caution building in lender’s outlooks in regards to the eurozone, and the higher costs in lending due to the rise in swap rates, which are the interest rate costs lenders charge one another for lending.  Interest rates associated with remortgages are changing and homeowners should be prepared to see them continue to do so for many months ahead.