Brits should ‘prepare for interest rises’ as urgent money warning issued | Personal Finance | Finance
Money experts urged Brits to “prepare for interest rises” and issued fresh advice to housebuyers following the Bank of England’s decision to hold rates. The Bank’s monetary policy committee (MPC) voted six to three to keep its key base interest rate at the current level of 3.75%.
However, the bank stressed that further escalation in the Iran war could drive inflation above 4% next year, adding to cost of living pressures on households. Ed Monk, pensions and investment specialist at Fidelity International said “this may well be the calm before the storm”. He warned: “Households should brace for borrowing costs to rise in the months ahead.”
The pensions expert said bosses expected a quarter-point rise before the end of the year, with further rises likely early next year and then again within 12 months from now.
“Were those rises to come to pass, they would take the Bank Rate to 4.5% and represent a significant squeeze on households,” he said.
The Bank of England itself warned that an “adverse scenario” involving a prolonged war in Iran and oil prices remaining above $100 a barrel could drive UK inflation to a peak of 4.5% by the middle of 2027.
Laura Suter, director of personal finance at AJ Bell, said this was “less good news for anyone planning to remortgage or buy a property”, because they had seen lenders raising rates since the middle of this month.
She said the level of uncertainty around global developments mean any drop in interest rates was “far from guaranteed”, and advised shopping around now for fixed deals.
“At times like this, it can make a great deal of sense to hedge your bets. If you have a remortgage due in the next six months, check if you can agree a deal for your remortgage now,” she advised. “If rates fall from here, you can shop around elsewhere, but if they rise again, you’ll have locked in a competitive rate.”
“They face the dilemma of taking a bit longer to save up a larger deposit pot, meaning they can access cheaper mortgage rates, versus risking mortgage rates rising during that period.”
Alice Haine, head of personal finance at Hargreaves Lansdown, said renewed tensions in the Middle East prompted several high-street lenders to raise mortgage rates in recent days.
“Anyone looking to sign up for a new mortgage or refinance an existing deal would be wise to lock in a new product quickly rather than wait for borrowing conditions to improve further. You can typically begin the remortgaging process six months before your current deal ends,” she said.
“Once a new product is secured, keep in close contact with your broker as they can often switch you to a better rate right up until two weeks before the term starts, if conditions improve.”
