To Fix or Not to Fix
It's been widely reported that inflation has increased to 3.7% (CPI). Along with the increasing pressure for the Bank of England to increase the base rate from 0.5% this should have the 7 million variable rate mortgage borrowers reviewing their mortgages. Swap rates, which underpin fixed rate mortgages, have started to rise and mortgage rates look as though they have bottomed out. Lenders have been withdrawing products and are relaunching them at higher rates. For example, Skipton Building Society has withdrawn all their three and five-year fixed rate deals due to "unprecedented demand" and fears of rising interest rates. Santander's economists are predicting Bank Base Rates to increase by 0.25% in May, another 0.25% in September and a further 0.25% in December. The swap rates market builds in "expected changes" so as the likelihood of a rising Bank Base Rate increases, fixed rates will become more expensive even before there is a change. However, home owners should not only consider interest rates but also the value of their home. If they have only 20% to 25% equity in their homes, falling house prices could make it more expensive to re-mortgage.