Whilst there had been hopes of an interest rate cut in March following the latest inflation rate figure, the conflict in the Middle East has put an end to those hopes. The Monetary Policy Committee (MPC) has, instead, voted in favour of keeping the Bank of England (BoE) base rate at its current level of 3.75%.
An anticipated BoE base rate hold
It’s no surprise that the base rate hasn’t been lowered as the Bank of England has to walk a fine line to keep inflation under control. During the MPC’s last review in February, the vote to hold the base rate at 3.75% was a close one, at 5-4. This was a much narrower split than had been anticipated by many economists. And as the conflict has continued, there are concerns that it could push inflation up again.
Economists had, therefore, correctly predicted this MPC decision on the BoE base rate. However, beyond that, it’s uncertain what will happen due to increased instability caused by the Middle East conflict. There’s a heightened concern that inflation will soar to the high levels previously experienced in 2022. With interest rate cuts later in the year now looking less likely, the potential for increased interest rates lies ahead instead.
How have mortgage rates been affected?
The inflationary impact of the Middle East conflict has already caused swap rates to increase. Swap rates determine lenders’ costs and if they increase, lenders’ mortgage rates typically increase to cover these extra costs.
The increased swap rates and heightened market volatility have, therefore, led many major mainstream lenders, such as Barclays, Nationwide Building Society, HSBC UK and Halifax, to increase the rates of their fixed-term deals. More lenders swiftly followed suit and others are expected to increase their rates in the near future.
In early March, the turbulent market caused mortgage rates to rise above 5%. Smaller lenders have had no choice but to temporarily withdraw some of their fixed-rate mortgage products altogether for purchase applications and remortgages.
Consider locking in a new rate now
Many lenders allow you to lock in a new rate up to 6 months before your existing mortgage deal ends. If a better deal becomes available before your current deal’s expiry date, you can simply change to that one instead.
This flexibility means that it’s highly recommended to consider this option, especially with the current uncertainty. If you wait to see what happens, you risk rates going up even higher and losing out on the current prices. If you leave your deal as it is and do nothing, your rate will automatically be switched to the lender’s standard variable rate (SVR) when your deal expires. This isn’t a good option as the SVR is usually more expensive.
Locking in a new rate now, therefore, protects against future increases but gives you the option to change it for a lower one if the market turns and rates come down in the near future.
We can find the best deals for you
Our mortgage brokers are here to help you make the best decision for your mortgage or remortgage. They can discuss your circumstances and needs before comparing the deals available to find the most suitable one in terms of price and flexibility. Give us a call on 01322 907 000 to have peace of mind that you’ve got the best mortgage solution in place during this volatile time.