What should you do if you are coming to the end of your fixed-rate mortgage deal?
Amid a cost of living crisis and rising inflation, you might be looking at your monthly outgoings a little closer nowadays. So, should you be looking to fix your mortgage rate? Read this article to learn more.
It is expected that over 1.5 million homeowners will be coming to the end of their fixed-rate mortgage deals in 2024, and the Bank of England estimated that around 5 million homeowners will see their monthly mortgage payments rise between now and 2026.
If the end of your mortgage fixed rate is due in the coming months, you might wonder what is best to do. Should you fix your rate again or ride out the variable rate until the market settles?
It ultimately comes down to your circumstances, future plans for the coming years, and capacity for variation in your monthly outgoings. Although, at a time when there are particularly high living costs, a regular monthly outgoing might keep your mind at ease.
Andrew Bailey, the governor of the Bank of England, predicts that the Base rate will remain at its current level of 5.25% for some time, with no cuts for the 'foreseeable future' as inflation still has to fall.
Those rates may increase slightly again, but it is perhaps less likely that they will start to reduce. With that in mind, there is no real benefit to staying on a variable rate for your mortgage because it is likely to go up in price, so perhaps it is best to fix it?
The Bank of England raised the base rate 14 times between December 2021 and August 2023, and the rate sits now at 5.25%. In November 2023, the Bank of England kept the base rate at 5.25% for the second meeting in a row, potentially signalling that interest rates are near their peak now. However, the Bank of England also warned that it will raise the base rate again if inflation proves stubborn.
Investment markets are predicting the Bank of England will likely keep the base rate above 5% until the summer of 2024. Don't forget that average mortgage rates will inevitably be much higher than that. The other coloured lines show the market predictions made in recent weeks/months. For example, the blue line was the prediction made on the 7th of July, 2023. In other words, the market now thinks the base rate won't rise as high as it previously thought, thanks to lower-than-expected inflation data.
So, if you have decided that fixing your mortgage rate is a safer option so that you know where you are with your outgoings, the next decision is, how long for? Mortgage lenders offer a range of mortgage products, with fixing options for 2, 3, 5 or even 10 years. The longer you fix the rate, the longer you are tied in. This could have a knock-on effect on your plans if you decide that you want to sell your property.
The question of whether you should fix your mortgage rate centres around a gamble about whether the interest rates will go up or down and how that will impact your monthly charges and available budget. Historically, the norm for the base rate has been around the 5% mark, and there has been no change for several months now, so it is fair to assume that, provided the level of inflation doesn't rise again, the interest rate will stay as they are.
If you are considering your options and would be interested in a review of your mortgage, get in touch with our team of property experts, who can put you in touch with the right people to help you.