How do interest rates affect your mortgage and buying a property?

Posted on Tuesday, February 16, 2016

The uncertainty of the global economy means we are likely to see the Bank of England interest base rate stay at its record low of 0.5% for a while longer. How does this impact on mortgage rates and your property investment?

Interest rates, with the base rate set centrally by the Bank of England and then individually by each lender depending on product and the timescale of the loan, determine the cost of borrowing money. The underlying base rate affects the whole UK economy, aiming to maintain monetary stability. Interest rates are currently at their lowest in UK history; but they can reach other extremes, including the record high of 17% in 1979.

How does this affect your mortgage?

With the low base rate, the general trend for mortgages is a falling of interest rates across a range of products. If you have a deposit of 40% or more, you can pick up the best deals across fixed rate mortgages with relative ease.

As mortgage rates fall, if you have the capital and the financial security you can seek out great deals when buying a home or remortgaging. As The Telegraph reports, recently the cheapest ever 10-year fixed rate deal was launched by First Direct, charging 2.89% for borrowers with a 40% deposits. If you take a First Direct current account with the mortgage, it also comes with no fee, making it the cheapest on the market (at the time of writing).

The Bank of England is predicted to hold its 0.50% interest rate well into 2017, or even 2019 according to some reports, which is of huge benefit to those seeking a mortgage and investing in property. Choosing your mortgage product well, and with this in mind, can reduce the amount you borrow and your monthly mortgage repayments. Just remember that, as always, rates can go up as well as down, and predictions are not set in stone! Your property may be repossessed if you do not keep up repayments on your mortgage.

It’s a great time to invest in property, whether you are a first time buyer or thinking about becoming a Landlord. Find out more by talking to us today.