Newspaper article The Journal (Newcastle, England)
Be Prepared Warning on Mortgage Rate Rises; Steve Urwin Warns Those with a Mortgage or Hoping to Take One on to Prepare for a Rate Rise
AMERICAN statesman Benjamin Franklin wrote in 1789 that "in this world, nothing can be said to be certain, except death and taxes".
We can add a third to his list - that, sooner or later, the Bank Of England is going to raise the base interest rate from the 0.5% figure that it has been for over five years.
While all sorts of fiscal and political factors will influence when this rise takes place and how much it will be, anyone who's going to be affected by it should be preparing now to mitigate its eventual impact.
From a home ownership point of view, there are two categories to whom this applies - those looking to get on to the housing ladder and those already there.
For homeowners, any immediate impact of a rate rise will depend on whether you have a fixed rate or variable mortgage, as while payments on trackers will almost certainly increase immediately and other variable rate schemes likely to follow suit shortly afterwards, any fixed rate you've signed up to will obviously remain the same for the term of your mortgage product.
In an environment where it is when an interest rate rise will happen rather than if, there's a real imperative for homeowners to investigate the fixed rate options available to them if they value the certainty of having fixed monthly repayments. With the base rate still at a historically low level, there are some very attractive deals still available.
The length of this fix can be tailored to your particular requirements, with longer-term options of up to ten years available across the market, and having this level of certainty will provide a bedrock on which you can base all your other spending plans.
For first-time buyers, the increased mortgage costs associated with an interest rate rise are another factor that has to be considered when planning how much they can afford to spend on both buying and running a home.
Pulling together a realistic budget, including all the ancillary costs associated with owning your own home, such as utilities, council tax and transport costs, is essential if you're going to have an accurate idea of what you can afford before you go looking for houses to buy. …