TO FIX OR NOT TO FIX

I’m sure it won’t have escaped your attention that, in August, the Bank of England raised the base rate by 0.25% to a still astoundingly low 0.75%. Many of us remember when a base rate this low was unheard of. In fact, during the 10 years from Oct 1998 to Oct 2008 the Bank of England average base rate was 5.04% – a rate which would likely cause mass panic now. Despite the continued low cost of borrowing we still find ourselves worrying about increases.

fixed-rate-mortgageVariable and tracker rates have been out of favour for many years, and rightly so in my opinion. As a mortgage adviser, our advice must always focus on keeping clients safe and ensuring payments remain as affordable as possible. The Bank of England will no doubt have to continue raising the

base rate over a period of time to bring it back to a reasonable level which is sustainable for the country. But does this have to mean mortgages become unaffordable and should we be panicking about interest rates increasing dramatically? My personal view is no, the country could do without any more financial uncertainty for a while. My advice is that now is the time to be fixing your mortgage rate. Too many people have reached the end of their fixed rate and happily transitioned onto a very attractive variable or tracker rate. I understand if you’re offered a cheaper rate which is going to save you some pennies, fabulous! But are people complacent? Have people become used to paying a low rate of interest, not planning the inevitable time when interest rates will have to return to a more reasonable level?

If you’re sitting on a variable or tracker rate my advice is fix it now. I don’t believe interest rates will increase rapidly in the near future but the reality is none of us know for sure. By fixing your interest rate you’re buying yourself some certainty. Yes, that rate will be higher than the variable rate but it will give you peace of mind, not forever, but it certainly will for a period of time. We’re still seeing record low interest rates on 5 year fixed mortgages so accepting one of those deals now just means you have certainty until at least 2023. People tend to be afraid of longer fixed rates because of the fear it will tie them down. The solution is to ensure when you’re speaking to an adviser that the mortgage is portable; by this I mean you can take it to another property. I believe right now is the time to buy your certainty, pay for peace of mind and rate increases won’t be such a scary thing.

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