Mortgage borrowers have enjoyed low interest rates with the Bank of England base rate being at its lowest for over five years. However, economists have predicted that this is all set to change in the next year with interest rates predicted to rise.
If you’re in the market to buy a property or remortgage your current property, you have even more reason to keep an eye on interest rates. Read on to find out from Lawsons and Daughters, a Hammersmith estate agents on how you can prepare for interest rate rises.
Get your finances in order
April saw the introduction of mortgage market review system. This is a simple affordability checker that lenders use to make sure you can repay your mortgage installments. An increase in interest rates will mean you will be paying more back each month. Sorting out your finances in order to prove to your lender that you are able to comfortably make the repayments is a wise idea.
Don’t book an expensive cruise or go on a wild shopping spree just before you apply for lending. Likewise, keep out of your overdraft and make sure you pay your bills on time.
Give yourself plenty of time
If you are remortgaging your property, you need to give yourself at least fourteen weeks before you want to complete on the remortgage. Shop around for the best deal and don’t feel obliged to stick with your current lender. When you are offered a rate, take note of the expiry date. You don’t have to take advantage of the rate straight away, and some mortgage providers will hold the rate for up to sixty days.
Remortgaging gives you an opportunity to get a better interest rate than your original mortgage. This is because you will have paid of a portion of your mortgage already and are likely to be borrowing less money.
You will have to pay a fee if you want to exit a mortgage early or move to another provider before you are due to move. However, this may mean you are able to save money in the long run by switching to a fixed rate mortgage with a low interest rate.
Don’t be afraid to have to pay a fee if it means your mortgage repayments will be lower in the long term.
Use a broker
Use a broker when looking for the best interest rate. Every time you make a search, it will get listed on your credit file. This will inevitably lead to a bad reputation. Lenders may see you as someone who has been rejected for mortgages.
An independent broker will check interest rates without leaving your footprint. So you can shop around without fear.
Lock in mortgage rates
If you have equity in your home, now is the time to lock in good interest rates on a fixed term mortgage.
A five-year fixed rate will protect you from any increases until 2019. Ninety per cent of borrowers are opting for fixed rate mortgages so they can expect what to pay every month. Longer term deals also prevent you from having to remortgage to another product once your current rate runs out.
Interest rates will rise in the next year, but this needn’t be a frightening or scary proposition. Taking control of your finances and living to a sensible budget is a good idea in any economic climate. There are plenty of online budget tools that can help get your finances in order and give you confidence when the impending interest rates hit our economy.