Mortgage warning as interest rates ‘unlikely’ to come down this year

Homeowners may see their mortgage repayments continue to increase and remain high throughout this year.

The base interest rate set by the Bank of England is currently 4.5 percent with many analysts expecting it will go up again, with inflation remaining high at 8.7 percent.

This could mean variable rate mortgage repayments will continue to increase, piling the pressure on Britons’ budgets.

Stuart Cheetham, CEO of MPowered Mortgages, said: “Around 15 percent of mortgage holders are on some form of variable rate at around the 5.5 percent to six percent mark.

“This could be notably more than what they were paying before and may mean some struggle with their payments or have to change their lifestyles significantly to be able to make the payments.

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“We strongly urge borrowers to seek independent mortgage advice so they can find the best deal that meets their needs.”

He warned monthly repayments could go up on average by as much as 25 to 30 percent, urging people facing this bills hike to reach out for independent advice to ensure their repayments are “sustainable”.

Some analysts are predicting the base rate could peak at five percent or higher later this year.

But Mr Cheetham warned it is hard to predict what will happen in the months ahead. He said: “It is clear that the Bank of England will continue to use the central base rate to fight inflation, and so until inflation starts to come down, it is unlikely we will see any reduction in interest, and therefore mortgage, rates.

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“Our latest view is that we are unlikely to see any rate reductions this year, and that the first half of 2024 appears to be a more realistic timeline.”

Kevin Roberts, managing director of Legal & General Mortgage Services, explained how different types of mortgages will be affected by another rates rise.

He said: “There are various types of variable rate mortgage products, so the first step should be to understand which you have and how it might be impacted by any movement in the base rate.

“A tracker rate, for example, will follow the base rate and therefore rise in line with any increases.

“If you have a Standard Variable Rate (SVR) mortgage, you may also see a rate rise if the base rate moves upwards, and there could be much better options available to you, so it is certainly worth shopping around and speaking to a mortgage adviser.”

He also said it is difficult to predict how interest rates will move over the coming months, but he said monitoring swap rates may help with this.

He explained: “Banks will consult these when pricing their fixed rates. At a basic level, swap rates control how cheap it is for banks to borrow money and they have stayed fairly steady recently, even when we have seen base rate rises – this is good news for borrowers.

“Interestingly, the pricing of longer deals has been more competitive than shorter deals, which is the opposite of what we usually see and suggests the markets are positive about the future.”

Mr Roberts said it is vitally important to speak to an adviser to make sure a person gets the best deal on their mortgage.

He said: “If you’re stressed, confused, or even just want some reassurance that you’re on the best option for you, then book an appointment with an adviser.“

“Advisers have a wealth of knowledge and expertise that will allow them to offer advice that is personalised to your exact circumstances.

“Many also have access to exclusive mortgage products that are just not otherwise available to customers. No one should have to tough it out alone and there is plenty of help out there.”

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