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Rising interest rates should be a call to action for those with a mortgage

Mon, 27 Nov 2006

The Bank of England’s decision to increase base rates by 0.25 percentage points to 5.0 per cent on the 9th November was a somewhat unwelcome early Christmas gift for the majority of mortgage holders in the UK. Affordability, already in question this year, has become a major issue for many people with mortgages . However, locking into a mortgage deal now could save money in the long run.

Increasing interest rates are not the only expense most people have to worry about. The cost of Christmas is looming, and rising utility bills don’t help financial matters. The variable rates of most mortgage lenders are now approaching the 7 per cent mark, meaning fixed-rate mortgages are generally set around 5 per cent. But have the Monetary Policy Committee increased interest rates for the last time?

Many experts believe that interest rates will increase still further in the New Year, leaving many buyers over-stretched beyond their means. However, securing a good deal for those entering the mortgage market or remortgaging for a new loan should not be considered a thing of the past.

Despite the rapid decision by most mortgage lenders to pass the percentage point increase in base rate to customers, many fixed-rate deals remain good value. The type of products leading the market fluctuates throughout the year. Fixed-rate mortgages started out this year with the best interest rates. Although tracker mortgages were briefly considered the best value on the market, many experts now indicate that a fixed-rate mortgage could be the most sensible option over the next few years.

Lock in now, experts urge, and make the most of good mortgage deals.
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