For those mortgage borrowers edging closer to the end of a tie-in period on their mortgage, taking the opportunity to review their interest rate could save hundreds of pounds per month. In particular, fixed rates have remained at record low levels over the past 18 months and have dropped further since the turn of the year.
While it has been the case for the past 3-4 years that borrowers could benefit from low reversion standard variable or tracker rates, that their lender has offered once a discounted period has ended, concerns that interest rates are highly likely to increase at some stage in 2016 will put an end to this being the prevailing option for many re-mortgagers.
Associate Director for Contractor Mortgages Made Easy, Simon Butler, noted that changes could take place very quickly once the Bank of England raise the UK bank base rate. He said: “Historically, once the Bank of England chose to increase the base rate, the banks show very little hesitation in taking the opportunity to increase interest rates. That will mean wholesale increases to all fixed and discounted rates, the margins on existing tracker rates will naturally increase and lenders will almost certainly raise their in-house standard variable rates.”
Considering the savings that could be made, Butler confirmed that moving from a standard variable rate could save many borrowers a substantial amount of money per month. He said: “For a mortgage of £200,000 on a capital repayment basis over a 25 year term, a mortgage repayment on a standard variable rate of 4.75% would be £1140 per month. By switching to a 2 year fixed
rate of 1.69% with contractor friendly lender Clydesdale Bank, the monthly repayment would reduce to £818 per month.
“Savings such as these are widely available across the market, so it makes sense for borrowers to consider their position soon, so that they are not disappointed once interest rates increase.”
The Chancellor, George Osborne, will today use a speech in Cardiff to warn that the UK economy is not yet back on track, with vast drops in oil prices and ongoing unrest in the Middle East causing concerns that the economy could still falter. The Chancellor stated that, “Last year was the worst for global growth since the crash and this year opens with a dangerous cocktail of new threats. For Britain, the only antidote to that is confronting complacency and sticking to the course we’ve charted.”
Mr Osborne plans to say that: “there’s good news here and right across the UK. That’s because we have a national economic plan that backs business and skills, and is delivering growth, high employment, and rising wages.
“But as we start 2016, I worry about a creeping complacency in the national debate about our economy. A sense that the hard work at home is complete and that we’re immune from the risks abroad.”
Financial commentators view the speech as a potential precursor for interest rates rises to be implemented this year, although there are still concerns in some quarters of the Government that this could hamper consumer confidence. While the decision rests with the Bank of England, pressure could be brought by the Chancellor to force the issue.
Article By: Sarah Middleton, Marketing Executive at Contractor Mortgages Made Easy
Media Contact: Ratchelle Deary, Public Relations Manager
Tel: 01489 555 080