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Is a Rate Rise on the Cards?

Speculation is mounting that the Bank of England will raise interest rates as early as November, after a decade of no increases.

The base rate was cut to 0.5% in March 2009, and then fell to 0.25% in August last year following the referendum vote to leave the EU. The last time interest rates went up was in July 2007, when they increased by quarter of a percentage point to 5.75%.

Speaking on Radio 4’s Today programme last month, Mark Carney, Governor of the Bank of England, said that if the economy continues on the track it’s been on, we can expect an increase in “the relatively near term.” However, he said that when any interest rises do happen, they will be limited.

Most economists anticipate that November could see a quarter percentage point rise, which would bring the base rate to 0.5%.

Lenders raise rates!
Several lenders have raised their mortgage rates in the past week as the expectation of a rate rise pushes up the cost of funding. A host of the biggest lenders including Nationwide, Halifax, HSBC and Barclays are among those who have increased some of their fixed rate mortgage deals. Although some increases have been even higher, the typical increase has been around the 0.20% to 0.25% mark.
 
Once a number of lenders start raising rates, it can create a domino effect and others will often follow suit. As a result, homebuyers and those looking to remortgage may need to act quickly if they want to take advantage of the best rates currently available, as the likelihood is they won’t be around for long.

House prices remain stable!
Rising rates will mean steeper mortgage costs for those on variable rate deals, putting pressure on already-stretched household budgets. However, many people have locked into fixed rate deals in recent years, and so will be protected from higher mortgage payments.

If rates rise by 0.25%, the impact on those who are on variable rates should be modest, adding just under £22 a month to bills for someone on a £150,000 25-year repayment mortgage who is paying an average UK standard variable rate.

According to Nationwide’s latest house price index, UK annual house price growth remained stable at 2% in September, down from 2.1% in August. The average cost of a home in the UK is now £210,116, down marginally from £210,495 the month before.

House prices in some areas are however showing signs of slowing, which should help buyers trying to get on the property ladder. London house prices fell for the first time in eight years last month, with prices down 0.6% year-on-year.

We have partnered with L&C Mortgages the UK’s largest fee free mortgage broker. You will be able to get expert advice at the end of a phone when it suits you. Their expert advisers are on hand 7 days a week and will manage a full search of the mortgage market so you don’t have to.

Over 1 million people have come to L&C for fee free expert mortgage advice, so you know you can trust them to help you too.

Call L&C today on 0800 073 1958 or click here to request a call back!

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