On Thursday, the Bank of England’s Monetary Policy Committee (MPC) met, and the result was the thirteenth consecutive meeting in which a rate increase occurred. It was not only another increase, but a larger one than what some experts had forecasted. The rate was moved by a 0.5% increase to 5.0%. Much of the reasoning behind the larger than expected rate increase is due to there not being a meeting in July in which the MPC could react to inflation. It has remained stubbornly high and despite the recent rate hikes, inflation remained steady from April to May.

The June MPC meeting resulted in a 7 to 2 vote in favor of the half percentage point hike to the Bank’s standard base rate. The strong majority vote reveals the assertive stance the MPC is taking on moving inflation down toward the target rate of 2.0%.

On Wednesday, inflation data was released, showing it had remained steady at 8.7%.

The MPC released the meeting summary Thursday saying, “There has been significant upside news in recent data that indicates more persistence in the inflation process, against the background of a tight labour market and continued resilience in demand.

“The MPC will continue to monitor closely indications of persistent inflationary pressures in the economy as a whole, including the tightness of labour market conditions and the behaviour of wage growth and services price inflation. If there were to be evidence of more persistent pressures, then further tightening in monetary policy would be required.”

While the MPC is making decisions against inflation, they must balance it against the economy edging toward a recession and putting borrowers, such as homeowners, into a financial crisis as they face higher interest rates. 

Every year homeowners are coming to the end of their mortgage term. However, things are different for those that are coming to the end of theirs if they secured a fixed rate two-year mortgage in 2021. It was the end of 2021 when the MPC voted to increase the base rate and removed the all-time historic low base rate of 0.1%. The first of the thirteen consecutive meetings took the rate from almost zero to 0.25%. Lenders, too, had their own historic low rates and many homeowners secured their two-year fixed rate mortgage or remortgage then and until the end of their term have been shielded from the rising rates.

The difference in lender’s rate offers when the base rate was 0.1% and now that it is 5.0% is drastic. Homeowners will at the end of their term lose their historically low interest rate and have a choice of much higher rates. Borrowing, in other words, has gotten more expensive.

For homeowners to save money, experts encourage the consideration of a remortgage at the end of their term. Otherwise, they will be moved to their lender’s risky and often higher level standard variable rate (SVR). Avoiding a SVR could save money, and for some, a substantial amount of money could be saved due to a SVR being possibly double or more the rate of a remortgage. 

Also, with a remortgage, a homeowner could save even more money by choosing a fixed rate remortgage. Doing so shields the homeowner from further rate hikes, which could happen as soon as August when the MPC meets again.

Experts are forecasting a peak rate of 5.75%, but only weeks ago the peak rate was forecasted to be 4.8%. This is an insight for homeowners to be cautious in the current economic environment and create a financial strategy to find ways to save to protect their household budget. For most, the strategy will involve a remortgage.

Shopping online for a remortgage could quickly reveal what opportunities are available. Homeowners can visit the website of a remortgage lender to obtain a quote. Visiting a remortgage broker website could put numerous quotes from a variety of lenders in hand to review and compare in a matter of minutes. Brokers could also offer exclusive deals from lenders not offered directly to borrowers. 

Once homeowners gather quotes, they will be able to better determine what offer would be the best in helping them weather the storm of higher rates and higher repayments. Without considering a remortgage, the homeowner will be facing not only the changes in rates now, but the ones sure to come in the months ahead.

As the Governor of the Bank of England, Andrew Bailey, remarked, “The economy is doing better than expected, but inflation is still too high, and we’ve got to deal with it. We know this is hard. Many people with mortgages or loans will be understandably worried about what this means for them. But if we don’t raise rates now, it could be worse later.”