I’m a mortgage holder – what do I need to know in light of the recent BOE base rate increase?
Updated: Aug 28, 2018
If you’re on a fixed-term mortgage you won’t see any immediate change – though if your deal ends soon, the one you move to may cost more.
If you’re on a standard variable rate (SVR) or ‘discount’ mortgage, your mortgage is likely to rise by 0.25%, as most loosely follow the base rate. Such a jump could cost £180+/yr more per £100,000 of mortgage. However SVRs are set by individual lenders so you’ll need to check what yours is doing and when any changes will come into effect. About a quarter of mortgages – roughly 1.8 million – are on an SVR.
If you’re on a tracker mortgage your rate will definitely rise by the same amount as the base rate – 0.25%. Exactly when this happens will depend on your lender though – some have already put them up, while others have said they will increase in September. Roughly 1.3 million mortgages are trackers.
The key points for mortgage holders are:
If you’re on your lender’s standard variable rate, you’re likely massively overpaying. The average SVR is 4.24%, yet the top two-year fixed mortgage right now is just 1.35% – the difference in cost is over £2,500 per year on a typical £150,000 repayment mortgage with 25 years remaining. Even with switching fees you’d likely make a massive saving.
If you need to remortgage, this could be a unique window of opportunity. If you’re looking to get a better deal for your existing mortgage, it’s worth looking ASAP – as rates may be about to rise. The rates of the best new fixed deals have already started creeping up in the last few months – likely because lenders set them based on City swap rates (long-term predictions of interest rate trends), which have been pointing upwards.
Here’s what to do now if you’re a mortgage holder:
1.Dig out the details of your current mortgage.
Find the rate, if it’s fixed or variable, when the intro deal ends, what the term is, if there are early exit penalties, and crucially work out your current loan to value – the proportion of your property’s value you’re borrowing.
2.Contact Mortgage Tree and we will check if you’re eligible. What matters is if your credit score is good, if you can afford repayments and if you meet the lender’s criteria.
3.We at Mortgage Tree will then benchmark the best deal for you and show you what your monthly/annual savings will be.
Give Mortgage Tree a call now, we’ll be happy to help.