Despite experts being almost certain that the Bank of England’s Monetary Policy Committee would cut the rate of interest on 14th July, making mortgages even cheaper, they chose to keep it at 0.50% – the same rate it has been since 2008.
Despite the lack of change, there are important points to consider before taking out a mortgage.
Future interest rates
There is no consensus as to the future of interest rates. The outcome of the EU referendum has put the UK in uncharted water, so there have been wildly different predictions for the future. Mark Bogard, chief executive of Family Building Society, predicts that mortgages will remain competitive.
Before taking on a mortgage, it’s important to hope for the best, but know you can handle the worst. Could you still afford your mortgage repayments if interest rates increase? The Bank of England governor Mark Carney has warned that people taking out mortgages should be prepared for a jump in their mortgage costs of up to 3%.
He said: “If you are taking out a mortgage, at some stage during the life of that mortgage, conditions will be difficult. You need to be sure that you can repay that mortgage - you don’t want to lose your house or flat.”
Mr Carney did say that a 3% rise was unlikely, but also advised home buyers to have an adequate cushion to help them cope with other economic shocks.
Current low mortgage rates offer a great deal to movers, and there is no real way of predicting if the rates will be better or worse at the end of a fixed-term contract.
Once you’ve seriously considered all possibilities, there are lots of incredible mortgage rates that can be snapped up at the moment, making summer 2016 a perfect time to invest in property. Banks are getting competitive to see who can offer borrowers the best deal.
David Hollingworth, of mortgage adviser London & Country, said: “Borrowers have an outstanding range of mortgage options open to them at the moment.
“Those concerned about volatility in the near-term can currently fix their rate at record lows. That's likely not only to save them money now but also give real certainty around their monthly budgeting.”
Rates could still drop
Even though no changes were announced in mid-July, this does not mean that a drop is not on the horizon. Mark Carney, Govenor of the Bank of England, has recently hinted that the base rate could drop.
"Mark Carney's announcement that the Bank of England base rate could fall past its record low of 0.5% in the near-future means that savers need to brace themselves for even tougher times ahead. If a good deal is to be secured, savers will have to shop around and work hard, and keep a close eye on the market,” said Charlotte Nelson, of Moneyfacts.
Tobias Davis, head of corporate treasury sales at Western Business Solutions, predicts that the drop will come in August instead. The next chance they will have to change rates is on August 4.
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