Have you fixed your mortgage? Why you really should.
I like being busy, so I'm pleased to report I am working harder than ever at the moment. Almost all my activity is helping clients fix their mortgage rates, so remortgages rather than home movers, says Keith Hood, from Warners Financial Services.
Of course for those already on a fixed rate deal and tied in for the next few years, concerns about rate rises will not really have an impact on their current mortgage payments until their existing deal comes to an end, but for those who are looking to take out a new mortgage, borrow additional funds or re-mortgage at the end of their present arrangement, an upward change in interest rates means not only higher cost of borrowing but potentially reduced ability to borrow, as lenders' stress test affordability is at a higher rate and there is a greater need for larger deposits or equity.
The reality is, however, that irrespective of any decisions by the Bank of England, and the much hinted at rate rise that could occur, lenders are already gradually increasing their rates even as we speak, in part in anticipation of where they feel the interest rate decision is heading.
As interest rates rise, so does the cost of new borrowing, and for those whose existing mortgages are on variable rates, including those that track the Bank's base rate. It is estimated there are still over 3 million borrowers who are on a standard variable rate. I find this statistic amazing. For some in this category, their mortgage balance is perhaps low as they may be approaching the end of their mortgage and so they can cope with the impact of a rate rise with little consequence. However, for many it will hit harder, especially in an environment where wage growth is low, and inflation is eroding the value of the pounds in our pocket. There may also be other reasons where a variable rate makes sense in certain circumstances, but for the majority on a variable rate or tracker mortgage I'd strongly recommend that these borrowers seek advice as quickly as possible.
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With so much uncertainty ahead in relation to the economy, it seems to me that if it were a choice between letting my mortgage payments increase, through inaction, and having less to spend each month on myself and my family, or being able to have some certainty about my finances, by securing a fixed rate deal and knowing what my payments will be for a set period in time, I know where I'd rather have my money going.
Which brings me back to my initial point, many experts believe that now is the time to take control of the biggest financial commitment that most of us have and sit down with an independent mortgage advisor, review your arrangements, to understand whether paying more for your mortgage if rates rise is the right thing for you or is it a better decision, whilst rates are still low, to secure a deal that means you keep more of your hard earned money for you?
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I know I said I like to be busy but with over 3 million mortgages on a variable rate, don't all rush at once!
Keith Hood is the managing director of Warners Financial Services and can be contacted on 01953 607313 and firstname.lastname@example.org
Warners Financial Services has sponsored this column.