Mortgage repayments have been at their lowest for years thanks to thanks to the Bank of England keeping interest rates down. Both will rise at some point so making a decision now will make sure you keep the best mortgage rate for the longest time possible.
When will rates go up?
While we can't tell you exactly when interest rates will rise, Mark Carney, the Governor of the Bank of England, has said that he will keep Bank of England interest rates at 0.5%. This policy will be reviewed when unemployment drops to 7% . This figure is tracked by the Office of National Statistics on their home page and is currently 7.6%. This doesn't mean rates will rise the moment unemployment hits this target but it does give an idea of soon the rise will be. This was the hot topic of discussion on Radio 4’s MoneyBox programme recently.
What will that do to my repayments?
When the Bank of England increases rates, your mortgage lender will most likely follow suite and rise the rate of interest on your loan. The only exception to this will be fixed rate mortgages. Tracker mortgages follow the Bank of England interest rate exactly. So if the Bank of England increases the interest rate by .25% your interest rate will go up by the same amount. Variable rate mortgages use a rate set by the bank. Normally these rates follow the Bank of England rate closely but it's possible for them to rise and fall by different amounts.
Although the Bank of England interest rates are set nationally, where you live can make a difference to how much you have to pay each month. The mortgage deals you can take advantage of will partly depend on your Loan to Value (LTV) ratio – how much of your property’s value you need to borrow. So if you live in an area such as Dalston or Walthamstow where house prices have risen, you might be able to get a better deal.
Read our article on What Can Be Done To Keep My Mortgage Repayments Down? for advice on staying in control of your mortgage repayments.