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"With the Funding for Lending Scheme (FLS) being withdrawn, and the economy improving, we've almost certainly hit the bottom from a rate perspective.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Already many of the very best mortgage rate deals are being withdrawn.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.

Arts and Entertainment
Reimagined: Gwyneth Paltrow and Toni Collette in the film adaptation of Jane Austen's Emma
books
Arts and Entertainment
Jesuthasan Antonythasan as Dheepan
Cannes 2015Dheepan, film review
Sport
sport
News
Richard Blair is concerned the trenches are falling into disrepair
newsGeorge Orwell's son wants to save war site that inspired book
Arts and Entertainment
The pair in their heyday in 1967
music
Finacial products from our partners
Property search
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

    Guru Careers: Software Developer / C# Developer

    £40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

    Neil Pavier: Management Accountant

    £45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...

    Sheridan Maine: Commercial Accountant

    £45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...

    Laura Norton: Project Accountant

    £50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...

    Day In a Page

    Abuse - and the hell that came afterwards

    Abuse - and the hell that follows

    James Rhodes on the extraordinary legal battle to publish his memoir
    Why we need a 'tranquility map' of England, according to campaigners

    It's oh so quiet!

    The case for a 'tranquility map' of England
    'Timeless fashion': It may be a paradox, but the industry loves it

    'Timeless fashion'

    It may be a paradox, but the industry loves it
    If the West needs a bridge to the 'moderates' inside Isis, maybe we could have done with Osama bin Laden staying alive after all

    Could have done with Osama bin Laden staying alive?

    Robert Fisk on the Fountainheads of World Evil in 2011 - and 2015
    New exhibition celebrates the evolution of swimwear

    Evolution of swimwear

    From bathing dresses in the twenties to modern bikinis
    Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

    Sun, sex and an anthropological study

    One academic’s summer of hell in Magaluf
    From Shakespeare to Rising Damp... to Vicious

    Frances de la Tour's 50-year triumph

    'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
    'That Whitsun, I was late getting away...'

    Ian McMillan on the Whitsun Weddings

    This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
    Kathryn Williams explores the works and influences of Sylvia Plath in a new light

    Songs from the bell jar

    Kathryn Williams explores the works and influences of Sylvia Plath
    How one man's day in high heels showed him that Cannes must change its 'no flats' policy

    One man's day in high heels

    ...showed him that Cannes must change its 'flats' policy
    Is a quiet crusade to reform executive pay bearing fruit?

    Is a quiet crusade to reform executive pay bearing fruit?

    Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
    The King David Hotel gives precious work to Palestinians - unless peace talks are on

    King David Hotel: Palestinians not included

    The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
    More people moving from Australia to New Zealand than in the other direction for first time in 24 years

    End of the Aussie brain drain

    More people moving from Australia to New Zealand than in the other direction for first time in 24 years
    Meditation is touted as a cure for mental instability but can it actually be bad for you?

    Can meditation be bad for you?

    Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
    Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

    Australia's first-ever Eurovision entrant

    Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine