Make haste! Grab a mortgage deal now before interest rates rise

What’s the likelihood of interest rates increasing? How will mortgage lenders respond? And what do mortgage brokers recommend? Here are the answers.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

a young couple celebrate getting the keys to their new home by taking a selfie in the garden

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Whether you’re a first-time buyer or a homeowner looking to remortgage, you might want to lock in that fixed-rate mortgage deal before the Bank of England’s Monetary Policy Committee (MPC) convenes on 4 November 2021. Why? Because there’s a good chance the Bank of England base rate will rise as a result.

Will that lead to mortgage lenders raising their interest rates? And what are mortgage brokers recommending? Let’s find out.

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What is the forecast for interest rates in Q4 of 2021?

ONS inflation statistics for the 12 months to August 2021 indicate inflation is rising. However, the latest release shows a 2.9% rise in the 12 months to September 2021, down from 3.0% in the 12 months to August.

Regardless of the slight drop, experts believe there will be a further increase to 3.2% in the short term, eventually rising to 4%. It’s expected that these further rises will be reflected in subsequent ONS inflation statistics releases.

Additionally, Andrew Bailey, governor of the Bank of England, acknowledged that the energy crisis and the upcoming Christmas festivities would push inflation to higher levels. This means that it’s highly likely that the Bank of England will raise the base rate during the next MPC meeting on 4 November 2021.

In fact, after analysing the market, investment experts see at least an 80% chance of interest rates soaring and at least a 55% chance that the base rate will increase.


Will mortgage lenders raise interest rates?

Mortgage lenders have been undercutting each other, and the lowest mortgage rate currently available is 0.79%. Come next month, these offers might no longer be available if the Bank of England raises the base rate.

If you’re looking to take out a mortgage and your finances allow you to do so, now could be a good time to take the plunge before mortgage rates increase.

It’s pretty straightforward: if inflation continues to soar, the Bank of England will step in and raise the base rate. In turn, this will make bank-to-bank lending more expensive, and lenders will raise mortgage interest rates.

Come November, the chances are high that some mortgage lenders will begin announcing increases in mortgage interest rates.

What are mortgage brokers recommending?

First, keep in mind that we all have individual circumstances that set us apart. What might be a good deal for one person might not necessarily be ideal for another. So, it’s your responsibility to assess your financial situation to determine whether you can comfortably afford a mortgage.

Second, find out whether you can afford low-interest fixed-rate mortgage deals. You’ll notice that these deals start from 60% or 75% loan-to-value (LTV), meaning a larger deposit is needed.

Additionally, the most common fixed-rate mortgage deals run for two to five years. It’s your responsibility to find out which duration is ideal for your particular circumstances.

If a mortgage deal aligns with your needs and you’re financially ready, mortgage brokers are recommending taking the plunge before interest rates increase.

It’s also wise to consult an independent financial adviser if you’re unsure. This could help you avoid costly mistakes. You can also use the Motley Fool’s free mortgage calculator and debt-to-income ratio calculator to find out whether a particular offer is ideal for you.

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