With Bank of England base rate sitting at a record low for more than a year and a half, many mortgage borrowers have been content to allow their mortgage deal to lapse, and sit on their lender’s standard variable rate, or SVR. But with inflation still running well ahead of the government’s two per cent target, the picture may change. Rate setter, Dr Andrew Sentance, who sits on the Bank of England’s monetary policy committee, has voiced worries about prospects for inflation in recent days. He has also defended casting his vote for a small rise in interest rates four times on the trot. Dr Sentance believes a rise would help maintain hard-won confidence in the UK’s stance on inflation.
While rates stay at their current levels, it’s worth looking at the way we finance our homes. With rising prices in the shops and continued uncertainty in the jobs market, some borrowers may now choose the security of a fixed-rate mortgage, to lock in some of the benefits of the low rates currently on offer.
Others may decide that now is the best time to switch from a temporary interest-only arrangement, and begin paying back their capital loan. Given the deals now available, remortgaging in the current environment can also offer the opportunity to fund home improvements, or other major expenditure, on a basis to suit household budgets.
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