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"With the Funding for Lending Scheme (FLS) being withdrawn, and the economy improving, we've almost certainly hit the bottom from a rate perspective.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Already many of the very best mortgage rate deals are being withdrawn.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

PROMOTED VIDEO
News
Top Gun actor Val Kilmer lost his small claims court battle in Van Nuys with the landlord of his Malibu mansion to get back his deposit after wallpapering over the kitchen cabinets
people
News
Comedian Ted Robbins collapsed on stage during a performance of Phoenix Nights Live at Manchester Arena (Rex)
people
News
The actress Geraldine McEwan was perhaps best known for playing Agatha Christie's detective, Miss Marple (Rex)
peopleShe won a Bafta in 1991 for her role in Oranges Are Not The Only Fruit
News
newsPatrick Cockburn was able to update his agenda-setting 'The Rise of Islamic State' while under attack in Baghdad
News
Robert Fraser, aka Groovy Bob
peopleA new show honours Robert Fraser, one of the era's forgotten players
Life and Style
Torsten Sherwood's Noook is a simple construction toy for creating mini-architecture
tech
Sport
David Silva celebrates with Sergio Aguero after equalising against Chelsea
footballChelsea 1 Manchester City 1
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

    Recruitment Genius: Software Development Manager

    £40000 - £50000 per annum: Recruitment Genius: This is an exciting opportunity...

    Ashdown Group: Product Manager - (Product Marketing, Financial Services)

    £30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

    Recruitment Genius: Compliance Assistant

    £13000 per annum: Recruitment Genius: This Pension Specialist was established ...

    Ashdown Group: Market Research Executive

    £23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

    Day In a Page

    As in 1942, Germany must show restraint over Greece

    As in 1942, Germany must show restraint over Greece

    Mussolini tried to warn his ally of the danger of bringing the country to its knees. So should we, says Patrick Cockburn
    Britain's widening poverty gap should be causing outrage at the start of the election campaign

    The short stroll that should be our walk of shame

    Courting the global elite has failed to benefit Britain, as the vast disparity in wealth on display in the capital shows
    Homeless Veterans appeal: The rise of the working poor: when having a job cannot prevent poverty

    Homeless Veterans appeal

    The rise of the working poor: when having a job cannot prevent poverty
    Prince Charles the saviour of the nation? A new book highlights concerns about how political he will be when he eventually becomes king

    Prince Charles the saviour of the nation?

    A new book highlights concerns about how political he will be when he eventually becomes king
    How books can defeat Isis: Patrick Cockburn was able to update his agenda-setting 'The Rise of Islamic State' while under attack in Baghdad

    How books can defeat Isis

    Patrick Cockburn was able to update his agenda-setting 'The Rise of Islamic State' while under attack in Baghdad
    Judith Hackitt: The myths of elf 'n' safety

    Judith Hackitt: The myths of elf 'n' safety

    She may be in charge of minimising our risks of injury, but the chair of the Health and Safety Executive still wants children to be able to hurt themselves
    The open loathing between Barack Obama and Benjamin Netanyahu just got worse

    The open loathing between Obama and Netanyahu just got worse

    The Israeli PM's relationship with the Obama has always been chilly, but going over the President's head on Iran will do him no favours, says Rupert Cornwell
    French chefs get 'le huff' as nation slips down global cuisine rankings

    French chefs get 'le huff' as nation slips down global cuisine rankings

    Fury at British best restaurants survey sees French magazine produce a rival list
    Star choreographer Matthew Bourne gives young carers a chance to perform at Sadler's Wells

    Young carers to make dance debut

    What happened when superstar choreographer Matthew Bourne encouraged 27 teenage carers to think about themselves for once?
    Design Council's 70th anniversary: Four of the most intriguing prototypes from Ones to Watch

    Design Council's 70th anniversary

    Four of the most intriguing prototypes from Ones to Watch
    Dame Harriet Walter: The actress on learning what it is to age, plastic surgery, and her unease at being honoured by the establishment

    Dame Harriet Walter interview

    The actress on learning what it is to age, plastic surgery, and her unease at being honoured by the establishment
    Art should not be a slave to the ideas driving it

    Art should not be a slave to the ideas driving it

    Critics of Tom Stoppard's new play seem to agree that cerebral can never trump character, says DJ Taylor
    Bill Granger recipes: Our chef's winter salads will make you feel energised through February

    Bill Granger's winter salads

    Salads aren't just a bit on the side, says our chef - their crunch, colour and natural goodness are perfect for a midwinter pick-me-up
    England vs Wales: Cool head George Ford ready to put out dragon fire

    George Ford: Cool head ready to put out dragon fire

    No 10’s calmness under pressure will be key for England in Cardiff
    Michael Calvin: Time for Old Firm to put aside bigotry and forge new links

    Michael Calvin's Last Word

    Time for Old Firm to put aside bigotry and forge new links