A recent report in The Guardian suggests that homeowners who are currently on a variable-rate or tracker mortgage should consider the benefits of switching onto a fixed-rate deal before the Bank of England (BoE) moves to increase interest rates in the spring.
The comments come after homeowners rushed to remortgage onto fixed-rate deals in September and October last year, before the Bank moved to hike its base rate from a record low 0.25 to 0.5 per cent in November.
In recent weeks, the BoE’s Monetary Policy Committee (MPC) has intended that it plans on increasing interest rates “sooner and faster” than previously expected over the remainder of this year, assuming economic growth continues at its current pace.
Following the rumours, which first broke at the beginning of last month, many property sector commentators are expecting an increase in demand for fixed-rate deals over the coming months – meaning that lenders are likely to increase their prices on such deals for homeowners who do not act fast to remortgage.
Rachel Springall, of financial data website Moneyfacts.co.uk, said that many homeowners who have grown accustomed to low interest rates in recent years might “not be prepared for more than one rise to be priced in over the next year or so” – despite the BoE suggesting that at least two interest rate hikes are likely to be on the cards for this year.
“This demand for fixed-rate mortgages is likely to grow as we face economic uncertainty and speculation of a rate rise as soon as May this year,” she said.
Meanwhile, Jonathan Harris, of mortgage broker Anderson Harris, explained why moving onto a fixed-rate deal for two years or more was a good move.
He said: “The attraction is they give protection from potential rises for the medium-term, without locking the borrower in for too long.”
In addition, Daniel Hegarty, of property group Habito, said that consumers needed to overcome “misplaced fears” that mortgages are “complicated and too time-consuming to sort out” – and instead embrace the potential savings that can be made.