IMS Property Group CEO, Michelle Niziol, gives her thoughts on future increases in interest rates and the impact this may have on mortgage holders. Here’s what she has to say.
“In a bid to keep a lid on inflation, the Monetary Policy Committee agreed last week to increase the Bank of England base rate from 0.25% to 0.50%, taking it back to where it was in 2016. Whilst this increase is unlikely to have a major impact on mortgage holders, as more than 60% are on a fixed rate deal, future rate increases might and the Bank’s Governor, Mark Carney, hasn’t ruled that out.
“Detail in the Bank’s latest Inflation Report supported the view that at least two more rate hikes will be needed by 2020 to bring inflation back down to target. If the bank increased the rate by 0.25% each time, we would see a new base rate of 1%. This will make a significant difference to mortgage holders, especially those who have never experienced an increase in rates.
“Based on a mortgage of £150,000 over 25 years at 3.53%, mortgage holders could be paying around £78 extra per month, with a monthly payment of circa £750.
“We expect lenders to start factoring in another rate rise next year, so those who are on a variable rate mortgage or those coming towards the end of their fixed rate deal, should speak to a mortgage broker about the options to fix their mortgage rate. The quicker you act the better the rate you are likely to obtain.”