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How can I prepare for the mortgage rate rise?

Posted in Housing market | 0 comments

What will happen when the mortgage rates go up?

Either we think about our own house or about investment house we let, we all have the same question: what will happen when the mortgage rates go up?  In good times and in bad times, we need to make sure that we make our mortgage payments to the lender.  

In the last couple of years we enjoyed a dramatic drop in mortgage rates with Britain’s Bank of England holding rate at 0,5%, certainly the lowest for a long time. Many homeowners have their mortgage rate at 1% or 2%, which is a great help considering rising prices on fuel, food and about everything. :(  And of course if people have no equity in their houses, then they find it easier to keep the house and rent it out, while mortgage payments are manageable.   However, we all fear the time when the interest rates will go up, so we need to start thinking and planning in advance.

We saw already some changes starting. Despite the Bank of England rate being help at 0.5%, some banks have already increased their rate by 0.25 to 1.5% at the start of May, which impacted many families.  Halifax raised their rate by 0.49%, which affected around 850,000 customers.  Of course this will further impact the housing market, which is already very slow with first time buyers struggling to get onto the property ladder.  The number of approved mortgages started to grow last month, but the growth won’t sustain with the rates raising.   

 

How can I prepare for the mortgage rate rise?

Is there anything we can do? Most importantly, “don’t bury your head in the sand”, instead review your current mortgage, talk to your lender, and understand your options. If you mortgage is low, then enjoy the ride and  save some money for hard times to come. If your mortgage rate is still high, above 4%, then mortgage specialists suggest considering a re-mortgage to secure a fix rate for a few years, so your mortgage payments won’t go up when rates start to grow.

To your happiness.

Dasha.