The Bank of England Base Rate has been at a record low for 5 years now, at just 0.50%. That has seen mortgage borrowers enjoying some extremely low rates, especially as competition in the mortgage market has improved.
Although that has been good news for many homeowners the question remains when will Base Rate rise and not if. In fact the Governor of the Bank of England recently hinted that there was a chance it could rise sooner than many were anticipating.
That has led many to consider if interest rates could rise before the end of the year. The exact timing is still up for debate and some argue that it will still be next year before a change comes. Even then the Bank of England has been consistent in its message that interest rate rises will be gradual and relatively slow – likely to increase in ‘baby steps’ to coin one description.
Mortgage borrowers have been opting for fixed rates, attracted by the stability that they offer when costs are likely to head only one way. In addition fixed rates remain very competitive so there is little price advantage in the variable deals on offer.
However, fixed rates do fluctuate whether Base Rate is moving or not. As the point when a rate rise looks more likely the cost of funds increases and so the trend has been for fixed rates to drift upwards. In fact looking back to last summer the very lowest 5 year fixed rates were about half a per cent lower than they are today.
Anyone keen on locking into a low fixed rate would therefore be better to act quickly as the trend for fixed rates to get gradually more expensive only looks likely to continue.
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