Interest rates are at historic lows and it looks as though they could stay at 0.5 per cent for the rest of this year before beginning to rise again. So is now a good time to fix?
Firstly, it is important to put it into perspective. Historically, interest rates tend to bottom out around the 4 or 5 per cent mark, not 0.5 per cent. Borrowers on variable or base-rate tracker mortgages have been spoilt in recent months but this won't continue indefinitely. Rates are going to rise; the question is when and what should you do about it?
As usual, much depends on your circumstances. If you are on your lender's standard variable rate or have reverted to a cheap 'go to' rate, it is understandably tempting to stay put for now. Anyone paying around 3 per cent – or less – can't be blamed for wanting to enjoy those cheap mortgage payments a while longer. However, you must exercise caution if this is your strategy as rates could move quickly and you do not want to miss out on the most competitive fixed rates.
If you are paying nearer 5 per cent, now is the time to fix. Fixed rates aren't going to get any lower – indeed, some lenders are already raising their fixed rates on the back of rising funding costs – so if you can fix for around 5 per cent, now's the time to do it.
It is also important to consider your loan-to-value (LTV). If you have little equity in your home, you may wish to settle on a fix now. Savills Research believes the bottom of the market is in sight but some valuers may be tempted to downvalue your property further so in six months' time remortgaging may be even harder.
Whatever you decide to do, SPF can help. Speak to your usual consultant or contact us on 0870 900 7762 to get some quality advice and put your mind at rest.