On tomorrow’s expected Bank of England rate rise, Paula Higgins, Chief Executive of HomeOwners Alliance says,
Bank of England To Raise Rates
Most economists think the Bank of England will raise the base rate for the fourteenth consecutive time on Thursday, by 0.25 percentage points. Fingers crossed that a less aggressive rate rise will fuel better mortgage rates being made available to homeowners needing to remortgage. This trend has already started following better-than-expected inflation figures for June which led to some lenders reducing their fixed rate mortgages. We’d like to see more follow suit in offering homeowners better options for remortgaging.
Homeowners needing to remortgage are applying a “wait and see” approach with more borrowers taking out a tracker mortgage. A penalty-free tracker allows homeowners to take a holding position, from which they can switch and fix once the current cycle of interest rate hikes finally ends.
Those who are waiting to see what happens though need to not fall foul of staggeringly high Standard Variable Rates. More lenders are charging in excess of 8 and 9% so we urge mortgage holders to check their mortgage deal to ensure they’re not potentially paying thousands of pounds a year more than necessary. If they’re on the SVR they need to switch quickly. And if their current mortgage term comes to an end in six months, start looking now to secure a rate and avoid defaulting onto the lender’s SVR.
Let’s not forget the mortgage prisoners who are trapped on SVR rates set by the lender through no fault of their own. For instance they may have taken out their mortgage before the affordability assessments were introduced even though they have kept up their payments.
In light of the FCA’s Consumer Duty published this week, and in particular the commitment that financial service providers will “…offer products and services to provide fair value. This should mean you won’t be ripped off…” we hope the FCA will challenge this situation next.
The Consumer Duty doesn’t sit well with lenders allowing homeowners who fail to remortgage in time to roll on to extortionate SVRs of 9+%. Not only are the standard variable rates punitive, they are also completely inconsistent between lenders, making it harder for consumers to track. Lenders should be required to cap their SVR rates, for example 2% above interest rates, so that homeowners aren’t taken advantage of.
In the meantime, homeowners can get advice and support from our website at Mortgage Rate Rises: your options – in particular options if your fixed rate is coming to an end and the latest Best Mortgage rates.
