For the past seven months the base interest rate in the UK has been at an all time low of just 0.5 percent, which is the lowest it has ever been in the history of the Bank of England, which spans over three hundred years.
However, whilst the low base rate has been welcomed by consumers and industry groups many have already predicted that it is only a matter of time before the base rate starts to rapidly rise again, which is expected to happen as the country pulls itself out of recession.
With this is mind some industry officials are now urging homeowners to consider fixing their mortgage rates whilst they are still low, as they could otherwise find that their mortgage interest rate and monthly repayment goes through the roof once interest rates start to rise, which could ultimately mean that they struggle to keep up with repayments and could therefore lost their home.
One mortgage industry official said: “While this latest base rate hold is good news for consumers, the concern is that a degree of complacency has set into the market and homeowners and prospective buyers are starting to believe that interest rates will stay low forever. It was a similar mindset when property prices were rising at a record rate and people started to believe that prices would go up forever. We all know what happened next.”
He added: “Interest rates will rise, maybe not next month or the month after, but they will rise eventually, and the advice to many homeowners could be fix now if you’re on your lender’s Standard Variable Rate (SVR), rather than try to second guess the market.”
Another official said: “I’d suggest that with two-year fixed rates at 3.75 per cent and the best trackers at just below 3 per cent, we’re approaching levels at which fixed rates become an attractive option. And I’d be inclined to avoid SVR linked products – as opposed to trackers directly linked to the base rate – as when the UK base rate starts to rise lender these could prove volatile.”