UK mortgage brokers are advising property owners to carefully check the terms and conditions of their mortgages following news that there could be a huge increase in rates by 2023. This, in real terms, means that monthly mortgage repayments will potentially rise by hundreds of pounds if the BOE’s baseline is to rise, as has been forecast by the Office for Budget Responsibility.
Currently sitting at an all-time low of 0.1%, the base rate is expected to rise in the coming months in order to tackle rising inflation. It is not yet known what the rise will be, but we have been warned of a “worst-case scenario” where decreased wages and increased energy costs may cause the baseline rate to rise to as much as 3.5% by 2023. This, in turn, could see mortgage repayments rise by as much as 33%.
Director at mortgage broker Your Mortgage Decisions, Dominic Lipnicki, said: ‘For many borrowers, the idea that the Bank of England base rate could increase to 3.5 per cent by 2023 is very scary indeed.
‘Those used to record low fixed rates would be shocked to see their payments balloon if such an increase became a reality.
‘The market has not seen rates as high as this since 2008 and many borrowers would find such an increase devastating.
‘Many borrowers who are either on the lender’s standard variable rate or a few months away from their fixed rate scheme expiring will be keen to secure a new deal now to avoid that risk.’
Considering we are currently experiencing some of the lowest rates on record, the expected rate increase has come as somewhat of a shock. Lenders are suggesting that sooner or later the rates had to increase substantially.
‘There are early signs of upward pressure on mortgage rates, with markets anticipating a base rate rise.
Competition cannot hold prices back indefinitely
‘At some point we will start to see movement, and the historically low rates that we have today may have a very short shelf life. We could see upward momentum as early as the first quarter next year’, commented John Eastgate, managing director of property finance at lender Shawbrook Bank.
Brokers are urging people to carefully check their mortgages, particularly those with standard variable rates, and are encouraging them to consider switching to fixed-rate mortgages. Fixed mortgage deals at lower rates will allow households to budget more effectively for the coming years, which is vital with other household costs rocketing.
Chief executive at The Mortgage Lender, Peter Beaumont, said:’ For some, depending on the deal they are on, the financial benefits of remortgaging could outweigh any charges, especially during this period of record-low rates.
‘For anyone tied to a standard variable rate, then the best bet is to refinance as soon as possible.’