Many mortgage advisors believe the recent media focus on the rising rate of inflation is likely to spark a rush of borrowers seeking a remortgage to a fixed interest rate deal.
The measured rate of inflation (as calculated by the Consumer Prices Index) rose to 3.7 percent last month, almost double the government target of just two percent. When inflation rises, the cost of living grows and the £1 in a person’s pocket will buy them less than it did just a few months ago. Normally when inflation increases over the target, the Bank of England’s response is to increase the base interest rate, however, thanks to the recession the government has been using other methods to try to control the rate of inflation.
With the Bank of England base rate at 0.5 percent, as it has been for many months now, the Bank of England’s Monetary Policy Committee (MPC) has reportedly disagreed over how to tackle the issue and the rate was left alone last month.
As it appears inflation is continuing to rise regardless, experts believe there is mounting pressure for the MPC to increase its base interest rate.
The chief UK economist for IHS Global Insight, Howard Archer, commented in the Daily Mail:
‘There is a growing likelihood that interest rates will rise before mid-year.’
Mortgage advisors have seen over the last couple of years that many people have been content to leave their ending mortgage deal on their lender’s standard variable rate (SVR), meaning they have benefited from the low base interest rate even though they are open to increases at any time.
For those who believe the Bank of England rate may well increase later this year, it could be useful to know that a mortgage advisor can not only help then find the best deal for their circumstances, but many mortgage deals can be ‘reserved’ for up to six months in advance, so there is the possibility that they could reserve a cheap fixed rate before the interest rates increase whilst still benefiting from their cheap variable rate now.
Already, we are seeing a number of lenders increasing the interest rate on their fixed rate deals and many mortgage advisors believe fixed rates have got as low as they are likely to be.
