You might have recently read in the news that interest rates are rising. A few weeks ago, the Bank of England raised the base rate from 0.25% to 0.5%. This means the historically low 0.25% is no more. But, what does this mean for mortgages and house prices in the UK?
Well, whether you’re renting in Leeds, looking to remortgage, or you’re looking at houses for sale, hopefully our information will break down the facts you need to know about the rise in UK interest rates.
Will The UK Interest Rates Affect House Prices?
House prices being affected by the UK interest rates could be a concern for you if you’re selling your house or looking at houses for sale. However, house prices are likely to be unaffected by the rise in interest rates. UK house prices have remained stable throughout the EU vote and the general election so they’ll more than likely remain steady now.
How Will The Interest Rate Rise Affect Mortgages?
The answer to this question all depends on what kind of mortgage you have. In this section, we’ll go through what we know according to the kind of mortgage you have. It’s worth noting if your mortgage increases, it’s likely to be around £200 per year/ per £100,000 you owe. While this means more cash will be going out of your bank account, per month it will be manageable. So you shouldn’t have to tighten your purse strings too much.
Fixed Rate Mortgage
If you’re on a fixed rate mortgage, you don’t need to worry about the rise in UK interest rates rising. If you’re already on this type of mortgage, you’ll be protected from any rise in interest rates. However, it’s worth keeping in mind that if interest rates fall, you’ll be paying more than you need to.
The rise in UK interest rates will only affect those going into a fixed rate mortgage in the near future. Banks may increase the rates on these, so those good deals that have been around for years might not be so frequent.
Standard Variable Rate Mortgage
These mortgages will more than likely be directly affected by the interest rate rise. You’ll find that your lender will more than likely increase the interest rate on your mortgage in line with the figure set by the Bank of England. As lenders are free to make their own decision on this though, you may find that your lender doesn’t change anything. You may also find they use it as an opportunity to increase your mortgage interest rate slightly more. Always check with your provider to see what they’ve done and how it will affect your monthly outgoings.
A tracker mortgage means you will definitely be directly affected by the rise in interest rates. As the name suggests, they track interest rates meaning that when they’re low, you pay less. However, when they interest rates are high, your outgoings can increase dramatically. With the base rate of 0.5% set by the bank and a potential “pay rate” of 1.5%, your mortgage rate will increase to 2%.
Sometimes tracker mortgages are only for a set time. So if you’re on one of these, your mortgage might have reverted back to a standard variable rate mortgage.
Will The Base Rate Affect Me If I’m Renting?
If you’re renting in Leeds or you’re the landlord of Leeds accommodation, you might wonder how this situation will affect you. Well, if you’re renting, your landlord might potentially increase your rent to counteract any mortgage increases.
We hope this answers any questions you might have about the increase in interest rates announced in early November. If you’re looking to sell your house, you can do a free valuation on the Parklane Properties website. Please let us know if you need any more advice by coming into Parklane Properties in Leeds or by getting in touch on Twitter!
This post was written by Emma Hart