Intro: The Bank of England has increased interest rates for the 12th consecutive time, which means additional expenses for millions of borrowers looking for new mortgage deals. In this episode of Money Clinic, financial experts discuss the impact of interest rates on mortgages, long-term interest rate expectations, and why some mortgage rates are coming down despite the interest rate hike.
Macro Picture: Chris Giles, the economics editor of FT, explains that the long-term interest rates determine mortgage rates and that wholesale energy prices falling is good news for the economy. The decrease in wholesale energy prices puts downward pressure on prices, leading to long-term interest rates coming down. However, a strong labor market may cause self-sustaining underlying inflationary pressures, which companies and workers may exacerbate by increasing prices and wages.
Mortgage Rates: Andrew Montlake, the CEO of mortgage broker Coreco, explains that some lenders are offering a below-market deal, which is below the base rate, based on swap rates. Swap rates are future costs of money that financial markets predict interest rates will be at a point in the future. When swap rates fall, lenders’ fixed-rate pricing becomes cheaper and more competitive.
– Millions of Brits are paying too much for their mortgage, and they’re not taking advantage of cheaper offers.
– Over a million homeowners are stuck with interest-only mortgages with no way to pay off the debt, which could lead to severe financial problems and eviction.
– Some mortgage lenders allow mortgage holders to overpay, which can increase equity and save thousands of pounds in interest payments.
Key Takeaway: Homeowners should review their mortgage deals and take advantage of cheaper fixed-rate deals, which can save them thousands of pounds in interest payments. The long-term interest rates and the decrease in wholesale energy prices may cause some mortgage rates to come down slightly, providing opportunities for homeowners to save money. Additionally, overpaying on mortgages can lead to increased equity and significant long-term savings.
Conclusion: Despite the interest rate hike, there are still opportunities for homeowners looking for new mortgage deals to save money. By researching and taking advantage of cheaper fixed-rate deals, reviewing monthly payments, and overpaying on mortgages, homeowners can benefit from long-term savings.