Mortgage warning as Britons face difficult decision over rates: ‘To fix or not to fix?’

Mortgage warning as Britons face difficult decision over rates: ‘To fix or not to fix?’

Experts are highlighting that Britons are considering whether to “fix or not to fix” when it comes to mortgage rates following the economic downturn in the property market from last September. With analysts predicting the Bank of England will raise the UK’s base rate by 0.50 percent which will further impact homeowners down the line. In light of this, the British public are exploring their options to avoid paying more in repayments for their home.

Mortgage rates have risen alongside the base rate, which is currently at 3.5 percent. If a 0.5 percent hike is applied, it would increase to four percent.

While savers have been able to benefit from this decision, mortgage holders have been adversely affected by rising interest rates.

A fixed-rate mortgage allows people to have set monthly repayments and is considered cheaper than standard variable rate.

Usually, fixed rate deals offer a lower rate than a lender’s standard variable rate but recent changes to interest rates have affected the affordability of mortgages.

READ MORE: ‘World beating’ Isa savings option yields 6.6% with more to come

As it stands, fixed rate mortgages look to be expensive with the average two-year fixed rate being at 5.79 percent, according to Moneyfacts.

For those looking to get a fixed rate mortgage for five years, a rate of 5.63 percent will need to be paid.

Mortgage experts are urging the public to consider future changes to interest rates in their decision making over fixing or not.

Sarah Coles, a senior personal finance analyst at Hargreaves Lansdown, broke down the issues that have risen for those in the process of remortgaging.


Notably, the expert warned that those coming to the end of their existing fixed rate will have to come to a conclusion either way sooner rather than later.

She explained: “To fix or not to fix? It’s the conundrum that has faced remortgagers ever since the market was upended in September.

“There are no easy answers, but this rise will tip the balance for some. Fixed rate mortgages are still horribly expensive.

“However, a 0.5 percentage point rise is already largely priced in, and because inflation expectations have dropped significantly, fixed mortgage rates are expected to continue their gradual retreat from the peak.

READ MORE: Recession fears continue despite UK economy growing

Despite this, an immediate mortgage rate hike is likely following the Bank of England’s pending base rate decision which means there is no guarantee rates will drop immediately.

Ms Coles added: “Unfortunately, there’s no way of telling how much fixed rates will fall, or how long they will take to do so.

“Meanwhile, the cost of waiting will rise with the rate hike – because whether you fall onto an SVR or switch to a tracker rate, you’ll face an immediate squeeze.

“The market is broadly expecting another rise sometime in early 2023, so the squeeze won’t ease in the short term either. For some people this will convince them to pay more for a fix today, and take the uncertainty out of the equation.”

The Bank of England’s Monetary Policy Committee (MPC) is expected to announce another increase to base rate on February 2, 2023.

Published at Thu, 26 Jan 2023 15:53:00 +0000