Time to check your mortgage

Mark Carney has put the country on notice – the cost of borrowing is going to rise more rapidly than the Bank of England indicated only three months ago.

Savings wise, this for some could be good news. Interest rates need to go up more quickly than expected because the Bank expects the economy to grow more strongly than expected this year.

Unemployment is at its lowest for 43 years and, finally, wages are starting to pick up – as one would expect when the jobless rate is so low. That’s the good news for the UK.

The market was putting the chances of an interest rate rise in May at 50/50 even before the Bank’s inflation report, but now sees the chance of a rate rise that month as more probable than that, while a rate rise in August – a month after Mr Carney celebrates his fifth anniversary of becoming governor – is seen as a done deal.

Even a rise from 0.5% to 0.75% will feed through into higher mortgage rates. Swap rates, which mortgage lenders use to price their fixed-rate home loans, have already been rising with, for example, the two-year rate more than doubling during the last 18 months.

So, expats whose fixed rate home loan is up for renewal before August should be looking right now to lock in the current rates. Likewise, expat mortgage borrowers on a variable rate deal might also want to think about moving to a fixed rate deal.

The UK has just gone through a period, lasting nearly nine years, during which interest rates were held at record low levels.

They were kept at those levels because the Bank of England’s policy-makers were more frightened about deflation than inflation.

Review your mortgage deal if:

  • Fixed rate is ending shortly
  • Your current mortgage is on a standard variable rate
  • You wish to raise capital

Can we help?

If you would like some assistance please make contact and one of our advisers will be happy to help.