WHAT MIGHT HAVE HAPPENED

Markets had been expecting the Bank of England to increase Base Rate from 0.10% to 0.25% in a bid to rein in galloping inflation, and had already factored in this rate rise, along with further increases to 0.50% by next February, 0.75% by March, then reaching 1% by June.

The impact on mortgages would have been immediate for tracker rates, whilst new fixed options could easily have seen increases greater than this.

ACT NOW

What can borrowers do to keep future mortgage costs down to an affordable minimum?

Those borrowers who prudently chose a fixed rate of interest when they took out their mortgage, can rest easy for the time being, although they might expect to see their monthly repayments increase when their mortgage rate is reviewed at the end of their current fixed period.

For those on a tracker rate, it may be possible for most borrowers to move, without penalty, into a fixed rate product with their existing lender – no legal fees will be incurred, although it will usually be necessary to pay a booking fee which will normally be a maximum at £999 – but don’t delay, as lenders are likely to be reviewing their fixed rates now.

Fixed rate borrowers have less opportunity of flexibility, although if their existing fixed product is coming up for review within the next three months, it might just be possible to prebook a new fixed rate now.

For people who are currently applying for a mortgage, then a sensible option is to consider a five-year fixed rate which could reap dividends over the next sixty payments.

INCREASED COST OF BORROWING

Since mortgage interest rates fell to the current record levels, the cost of servicing a mortgage has been less of a challenge in recent years than when rates were well into double figures. The minor changes in Base Rate that are currently under discussion will have a modest impact on a family budget, although the increases are not likely to stop at 1%, as the trend is forecast to continue post Covid and post Brexit.