Why Interest Rates Matter (Even If You’re Not a Homeowner Yet!)
The Monetary Policy Committee (MPC) voted on the 19th of December to keep UK interest rates steady at 4.75%, opting for a wait-and-see approach. This comes as the economy faces a tough period, with no growth reported between October and December. Despite inflation staying above target and wages rising faster than expected, the Bank of England (BoE) is cautious about cutting rates too soon. While the outlook suggests rates may start to fall next year, there are no guarantees, and the first cut might not come until February at the earliest.
For anyone with a mortgage, this decision means payments won’t change if you’re on a variable-rate deal. However, those with fixed-rate mortgages coming up for renewal might face slightly higher rates before any potential cuts take effect. It’s a good idea to consider locking in a rate now if you’re considering re-mortgaging, as rates could continue to fluctuate.
Savers, on the other hand, may continue to benefit from higher interest rates, so it’s worth checking whether your accounts are offering competitive returns. Meanwhile, prospective property buyers still face challenges, with house prices remaining high and affordability stretched. A drop in rates next year could ease the situation, but the uncertainty makes planning tricky.
Chris Arnold, our Penguin Mortgage Adviser, says – “people should plan 6 months in advance as there are options that can be implemented at this time. Many don’t know you can secure a new rate 6 months prior to your current deal ending by way of a re-mortgage where a lenders ‘Offer Letter’ covers this period so the new deal would start when the current one ends. If, after investigation, a re-mortgage is not the best route, then a further appointment will be made to compare deals and secure a new rate with the current lender by way of a Product Transfers/Rate Switch usually 2-4 months prior to the current deal ending, depending on the lender.
Whichever route is taken, we re-look each month before the changeover to see if there is a more competitive rate available.
It is important to remember this 6-month rule in these fluctuating times as you could potentially save £10’s to £100’s which could make all the difference as your new mortgage payment may see a significant rise as a result of the interest rate increases in recent years.
As an existing Penguin Mortgage Client, we send a notification e-mail to make contact to arrange a suitable time to discuss available options when 6 months away from a current deal ending, and we would encourage anyone tied in to a mortgage to do the same.
We are available to help with this and any of your mortgage requirements so please reach out at any time by contacting Chris on carnold@penguinwealth.com or give us a call on 02920 450 143.