Remortgage now, ahead of the rate rises

When it comes to home loans the only way is up, so don't delay if you're looking for a better deal

Mark Dyason, director of independent UK mortgage broker, Edinburgh Mortgage Advice, insists that "interest rates can only rise". This may answer the prayers of Britain's hard-pressed savers, but for people who want to remortgage or those with an existing deal nearly at an end, any talk of rates rising is a red alert.

But why are rates going in only one direction – up? Well, Mr Dyason is only voicing a truism. Bank of England (BoE) interest rates are at 0.5 per cent and that's about as low as they have ever been, ergo they will rise at some point.

Mark Carney, the Bank's Governor, has set a notional target of seeing an uptick in rates once unemployment falls below the psychologically important 7 per cent mark. Although Mr Carney denies a direct correlation between rising rates and jobless numbers, but most BoE watchers reckon this equates to a rise in base rate coming in 2016 or perhaps a little earlier.

However, the biggest determinate on the actual interest rate that people pay on their home loans or receive for their savings has been the ready availability of cash in the banking system. The more cash is available the lower the rates offered.

But with house prices beginning to take off, the BoE has now decided to redirect it's £80bn pump-priming programme away from financing mortgages to business loans, which will may mean higher mortgage rates sooner than 2016.

"With the Funding for Lending Scheme (FLS) being withdrawn, and the economy improving, we've almost certainly hit the bottom from a rate perspective. So if you want to get one of the best fixed deals that will ever be made available, you need to act," says Ashley Brown, director of independent mortgage broker, Moneysprite. "Everyone just looks at the Bank of England headline rate and thinks that this dictates things. Right now the withdrawal of FLS is much more significant."

Already many of the very best mortgage rate deals are being withdrawn. If rates start to tick up then there is the chance – even now in an improving economy – of a rise in arrears and repossessions, according to director of Legal & General Network, Jeremy Duncombe. "With interest rates likely to rise in the short to medium term it's important that borrowers prepare financially for what could be an interest rate shock.

"Unfortunately there is a chance that as rates rise, arrears and repossessions could rise alongside... it may be wise for borrowers to seek advice and consider remortgaging to secure a better deal for themselves while rates remain at historic lows."

But which remortgage deal is best? Much depends on having a good credit rating and how much equity there is in the property; to access the best rates it would help to have at least 25 per cent equity, or in the case of a new buyer, a deposit equivalent to the same percentage.

Assuming these are in place, most mortgage-market watchers are edging borrowers towards medium to long-term fixed rate deals.

Mr Dyason says fixing is "a fantastic choice" but warns that a new tranche of regulation about to hit the industry may scupper some attempts to remortgage.

"It will become more difficult to secure a mortgage next year as a result of these changes," he says.

Finacial products from our partners
Property search
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Ashdown Group: Treasury Assistant - Accounts Assistant - London, Old Street

    £24000 - £26000 per annum + benefits : Ashdown Group: A highly successful, glo...

    Ashdown Group: Business Analyst - Financial Services - City, London

    £50000 - £55000 per annum: Ashdown Group: Business Analyst - Financial Service...

    SThree: Trainee Recruitment Consultant

    £18000 - £23000 per annum + OTE £45K: SThree: At SThree, we like to be differe...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + competitive: SThree: Did you know? SThree is the o...

    Day In a Page

    General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband

    Chuka Umunna: A virus of racism runs through Ukip

    The shadow business secretary on the benefits of immigration, humility – and his leader Ed Miliband
    Yemen crisis: This exotic war will soon become Europe's problem

    Yemen's exotic war will soon affect Europe

    Terrorism and boatloads of desperate migrants will be the outcome of the Saudi air campaign, says Patrick Cockburn
    Marginal Streets project aims to document voters in the run-up to the General Election

    Marginal Streets project documents voters

    Independent photographers Joseph Fox and Orlando Gili are uploading two portraits of constituents to their website for each day of the campaign
    Game of Thrones: Visit the real-life kingdom of Westeros to see where violent history ends and telly tourism begins

    The real-life kingdom of Westeros

    Is there something a little uncomfortable about Game of Thrones shooting in Northern Ireland?
    How to survive a social-media mauling, by the tough women of Twitter

    How to survive a Twitter mauling

    Mary Beard, Caroline Criado-Perez, Louise Mensch, Bunny La Roche and Courtney Barrasford reveal how to trounce the trolls
    Gallipoli centenary: At dawn, the young remember the young who perished in one of the First World War's bloodiest battles

    At dawn, the young remember the young

    A century ago, soldiers of the Empire – many no more than boys – spilt on to Gallipoli’s beaches. On this 100th Anzac Day, there are personal, poetic tributes to their sacrifice
    Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves

    Follow the money as never before

    Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves, reports Rupert Cornwell
    Samuel West interview: The actor and director on austerity, unionisation, and not mentioning his famous parents

    Samuel West interview

    The actor and director on austerity, unionisation, and not mentioning his famous parents
    General Election 2015: Imagine if the leading political parties were fashion labels

    Imagine if the leading political parties were fashion labels

    Fashion editor, Alexander Fury, on what the leaders' appearances tell us about them
    Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

    Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

    The architect of the HeForShe movement and head of UN Women on the world's failure to combat domestic violence
    Public relations as 'art'? Surely not

    Confessions of a former PR man

    The 'art' of public relations is being celebrated by the V&A museum, triggering some happy memories for DJ Taylor
    Bill Granger recipes: Our chef succumbs to his sugar cravings with super-luxurious sweet treats

    Bill Granger's luxurious sweet treats

    Our chef loves to stop for 30 minutes to catch up on the day's gossip, while nibbling on something sweet
    London Marathon 2015: Paula Radcliffe and the mother of all goodbyes

    The mother of all goodbyes

    Paula Radcliffe's farewell to the London Marathon will be a family affair
    Everton vs Manchester United: Steven Naismith demands 'better' if Toffees are to upset the odds against United

    Steven Naismith: 'We know we must do better'

    The Everton forward explains the reasons behind club's decline this season
    Arsenal vs Chelsea: Praise to Arsene Wenger for having the courage of his convictions

    Michael Calvin's Last Word

    Praise to Wenger for having the courage of his convictions