The Sunday Times - Money Made Easy: Your quide guide to ... interest rate rises
Families can expect interest rates to stay low for longer, as the latest report from the Bank of England led to analysts pushing their predictions of a rate rise back into 2015.
The Bank’s quarterly inflation report last week indicated that the base rate is likely to remain at the historic low of 0.5% for longer than expected. The report suggested that slower wage rises were expected, meaning there should be less inflationary pressure and less need to increase Bank rate.
Aaron Strutt of the mortgage broker Trinity Financial said: “So many borrowers are sitting on variable-rate mortgages and waiting for rates to rise before they remortgage that they are potentially leaving it a bit late.
“Young couples planning to start a family should consider taking a longer-term fix, particularly as children and childcare costs often reduce the amount they can borrow. By putting off remortgaging they may find it harder to qualify for a similar loan amount at a later date. Childcare costs and the possibility of a parent not returning to work could also cause problems.”
Top tip
Borrowers have rushed to fix mortgage rates to lessen the impact of a rate rise. However, those who can handle the risk could benefit from choosing a tracker. When rates do rise the increase is expected to be steady, which means tracking Bank rate could work out cheaper over the next few years.
Strutt said: “Some lenders, such as Nationwide and Barclays, are offering particularly low tracker-rate mortgages with the option to switch into a fixed rate when Bank rate rises. These allow borrowers to continue to benefit from the low rates and have the option to call the lender and take one of their fixes at a later date.”
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