Mortgage Rates Continue to Rise

The Bank of England base rate has been at a record 0.5% for well over two years now, with the aim of keeping interest rates down across the country and supporting home owners who became over-burdened with their mortgage during the credit crunch.

Whilst most experts agree that this strategy has worked, at least in terms of reducing the number of repossessions, mortgage rates themselves on the high street have been inching up steadily over the last few months. Chancellor, George Osborne, recently estimated that a 1% rise on the rate on the UK’s mortgage book would cost the average household an extra £1,000 a year, and some mortgages have gone up by a lot more than that.

In the interests of being even-handed, not all banks have celebrated the arrival of the Christmas period with a hike in interest rates. Spanish-based super bank Santander are the most notable of the banks to keep the rates of their home mortgages steady, but many smaller providers – to whom customers have previously turned for cheaper deals – have made steep increases.

Part of the blame for these rate hikes is being placed at the feet of the Eurozone, as the continental credit crisis has made it very difficult for banks to get short-term financing. Accordingly, many have chosen to lift mortgage rates to generate more cash and thus secure themselves a bigger capital cushion.

So, what can you do if you’re a prospective home buyer looking for a good mortgage? There are some schemes out there designed to help first-time buyers looking to purchase new homes, these can reduce your the amount of deposit you have to pay, whilst broadly keeping your rate the same and are worth consideration.

Another thing you can think about is experimenting with different types of mortgages, such as “interest only” or “current account mortgages.” Which one is best for you depends on your personal financial situation, so a mortgage calculator might be a good idea. For further information, check out Moneysavingexpert or one of the other popular financial advice websites.

Popular wisdom suggests that as interest rates and house prices are currently low, now is a good time to buy if you can afford it. Despite rates creeping up, this remains true, as long term predictions for house prices are forecasting sharp rises, and a rise in the Bank of England base rate will probably come at some point in the next two years. So, if you’re thinking about getting involved in the property market, now is a good time, before it gets even more expensive.