March 17th, 2022
Today The Bank of England has increased the base rate once more increasing it to 0.75%, the second time in 2 months. The new base rate represents the highest it has been since 2020.
In a summary of the Monetary Policy Committee (MPC) meeting, the body says it is a reaction to the Russian invasion of Ukraine and its attendant effect on commodity prices alongside further supply chain disruption.
The UK is not the only country reacting to the growing global geopolitical crisis with the Federal Reserve raising US interest rates for the first time since 2018.
It is believed that the MPC will look to push interest rates higher in response to the increased levels of inflation in the near future.
This increase further exasperates the growing concern on the cost of living with some financial news outlets expecting the rate of inflation to rise to double digits at some point in the future.
Simon Butler | Head of Mortgages for CMME said: “Today’s increase is the third within the past four months and confirms that the Bank of England is expecting the impact of the war in Ukraine to continue to raise the cost of living in the UK. Many people will have or are due to be receiving a notification from their energy providers to confirm what they will pay for their gas and electricity supplies from April and the cost of fuel is set to continue to rise in 2022 according to many economists.
Mortgage lenders have been consistently updating mortgage products on a weekly basis since the 0.25% increase to the base rate was announced in December 2021. The pace at which rates are changing is dramatic and its important to note the effect this is having on mortgage pricing.
Barclays confirmed today that their residential standard variable rate is rising to 5.24% from the 1st of May 2022. While lenders will look to remain competitive, they will pass on the cost of offering headline rates to customers unwilling or unable to secure these preferential rates.”
What does this mean for my mortgage?
Some lenders had already anticipated the move and decided to change rates to mortgages early, the same as they had in December and February. Those who had fixed their rate before these changes will be unaffected until the term of their current product ends. Mortgage customers on variable-rate mortgages will see the impact imminently.
If you are unsure about your mortgage deal, please speak to your CMME mortgage broker HERE.
Despite this increase in the mortgage rate, the early positive sign is that there are still plenty of competitive mortgage products available for potential and existing homeowners.
Another issue for self-employed?
CMME recently reported on the unfair treatment the self-employed community perceive they have when applying for a mortgage, with two-thirds of people worried they would be penalised for being self-employed when applying for a mortgage.
The good news is that although the rate does mean that you may be paying more for your mortgage, the lending criteria for most mortgages have remained largely the same. Although, due to changing remortgage rates with lenders, CMME Brokers are advising clients not to wait around before making a decision on their mortgage plans if they are considering a remortgage or property purchase.
Market commentators continue to predict further base rate increases in 2022, with a key factor in any rises being the impact of higher living costs for UK households. Balancing the need to increase rates while not overburdening homeowners with surging mortgage payments is going to be a difficult task for the central bank”
What can I do to make sure my mortgage is still competitive?
Review your Mortgage:
As mentioned, if you are already on a fixed rate then you will remain on your current rate until the fixed term ends. If your mortgage is due for renewal in the next 6 months, then now may be the right time to discuss remortgaging or transferring to a new product with your existing lender.
Make sure you’re on the best deal:
As with most things, mortgages are offered, with a wide range of different products available from many lenders. Reviewing the whole market is always a good decision, generally, when discussing a new deal CMME will look at many options, plus exclusives to ensure you get the best rate for you as a contractor or self-employed worker.
Useful Resources
- Base Rate Update: Why Homeowners Should Consider Remortgage | CMME Explains
- Settling Into IR35: The Future for Contractors | CMME
- Housing Bubble: Trouble on the Horizon? | CMME Investigates
Whether you want to talk specifics or are just after some general advice, CMME can help. Speak to us today on 01489 223 750 for a completely free, no-obligation initial mortgage consultation. Or click the button below.