UK Homeowners Advised About Sticker Shock
The base rate level of 0.5% has created a somewhat skewed idea of what a normal rate really is. The longer the base rate stays at 0.5%, the easier it will be to go into sticker shock when mortgage and personal loan rates begin to rise. There is a great chance that the majority of the UK, have lost touch with mortgage rate reality.
Karen Barrett, chief executive of unbiased.co.uk, commented on what the low base rate has caused for most homeowners, saying: "With the base rate now remaining at a record low of 0.5% for 21 months, possibly 22 months after next Thursday's base rate decision, our tracked research shows this has had a dramatic effect on homeowners' rate expectations." She added: "Their 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." Homeowners who will feel the greatest amount of pain when looking to change addresses, or remortgage their current locations, are those who purchased in the last few years only with a minimum deposit, those who took equity from their homes, and those whose homes have lost value. Many analysts are expecting interest rates to start rising sooner compared too later. They are also expecting rates to rise continually for the next two years. Even though lenders are hiking fixed rates to around 7% already, many housing advisors are urging those seeking a different lending product to get a jump on it and complete the process.