Finally, inflation seems to have let go of its stubborn grip and could be heading more rapidly toward the target rate of 2.0% than in months past. In June, the decline to 7.9% was hopeful as it could signal interest rates might not be increased as steeply as had been predicted. However, the change in the inflation rate will not slow down the efforts of the Bank of England’s Monetary Policy Committee (MPC) to tame inflation. Rather it is expected they will continue the assertive actions of past meetings to keep the momentum going. This could result in either a 0.25% or 0.50% rate hike to the Bank’s standard base rate of 5.0%. Either rate increase will take the base to a new high not seen in a decade and a half. 

The MPC’s decision to increase the rate will be the fourteenth consecutive MPC meeting in which the rate will have been raised.

While the efforts of the MPC seem to be making an impact on inflation, the higher interest rates are also making an impact on borrowers and namely homeowners.

Many homeowners are facing the end of their mortgage terms this year having secured a fixed rate deal when the Bank’s base rate was at an all-time historic low of almost zero at 0.1%. Lenders were offering their own historic lows and the interest rates were more affordable than seen in generations, but as those terms end, homeowners will be facing current interest rates which are much higher.

The current rates offered by lenders could be double or triple the rates available two years ago and cause financial strain for those with fixed rate two-year deals coming to an end. Despite the higher rates, there are still savings to be found.

When a mortgage term ends, if a homeowner does not remortgage, they will be moved to their lender’s standard variable rate (SVR). The SVR is typically higher than a remortgage, so by skipping the SVR and choosing a new deal, the homeowner could save money. A fixed rate will lock in the lower rate and protect the homeowner from further MPC hikes which will save even more.

The forecast is for the Bank’s rate to peak between 5.75% to 6.0%. 

There is good news for homeowners in that lenders have recently begun to lower their rates. This is more due to the rapid increases that occurred in recent weeks rather than the expectation of a rate cut by the MPC or that the rate will remain steady. Therefore, homeowners are encouraged to not overlook the opportunity of remortgaging at current rates. Those within six months of their term end are likely able remortgage without a penalty fee which is good for those looking to save by remortgaging with rates currently available.

Waiting until a mortgage term ends could have the homeowner facing higher rates, so shopping for a remortgage now could offer greater savings. Of course, those homeowners already moved to a SVR could save as well. Even homeowners not close to having their term end could find shopping for a remortgage helpful. The information could help with planning a strategy for when their term will end, or some homeowners have decided to end their term early to allow them to remortgage at current rates.

Shopping for a remortgage is simple and quick. A few minutes shopping at the website of a remortgage broker could put numerous quotes from a variety of lenders in hand to review and compare. Brokers could also offer exclusive deals from lenders not offered directly from lenders to borrowers. The homeowner could also go from website to website of remortgage lenders to gather quotes. Once quotes are in hand to review, homeowners can plan a strategy against paying more than necessary. 

As of Tuesday morning, there are more experts forecasting for a 0.25% increase by the MPC on Thursday, versus the prior expectation of 0.50%. While the smaller increase is more favorable, any increase could be difficult for a homeowner in adjusting their budget to accommodate higher rates. This is all the more reason to shop for a remortgage before rates rise further in future MPC meetings.

After the MPC meeting this week, on Thursday, 3 August, the final three meetings for 2023 will be held on 21 September, 2 November, and 14 December.