Habito comments: What rising interest rates mean for home owners and mortgage borrowers

With rising interest rates by the Bank of England likely, Habito commented on what that means for home owners and mortgage borrowers.

Martijn van der Heijden, chief finance officer at award-winning mortgage broker, lender and digital home-buying service Habito, said: 

“The Bank of England is likely to imminently increase interest rates in order to curb inflation. This could negatively impact housing demand as the cost of borrowing increases and, in turn, dampen demand for mortgages. This adds to the squeeze household finances are already seeing with increased energy and food prices as well as increases in National Insurance payments.

“For those who are already mortgage holders, there are a few options:

“Borrowers who are on a variable rate will feel the impact of inflation the greatest, even if the rate increases by as little as 0.25%, this could see their repayments shoot up by hundreds of pounds a year, so it’s worth looking at all the options.

“For savvy homeowners, now is the time to fix, as for those on long-term fixes, rising inflation effectively eats into the value of their mortgage debt and offers protection from any further rises down the line. This year saw the launch of Habito’s long-term fixed deals, where the rate is fixed for the whole mortgage term, for example, for 25 years, from 3.29% which acts as a great safety net to inflation uncertainty.

“With competition between lenders still very high, there are record-low deals of under 1% to be had for 2-year fixes, and even some 5-year fixes, but banks are already looking at pulling these from the market. For those going through the mortgage application process now, it’s worth locking in these great deals whilst they’re still available.”

Kindly shared by Habito

Main photo courtesy of Pixabay