Yes, it’s been 10 whole years since the Bank of England made any upward alteration in the bank base rate.
It was July 5, 2007, when the Bank of England’s Monetary Policy Committee voted six to three in favour of increasing interest rates to 5.75%. Expectations at the time were that the bank would follow this with a further increase, taking rates to 6% — a level not seen since the late 1990s.
The rise to 6% never came, with the global financial crisis starting to bite later in the year, leading the bank to begin a cycle of rate cuts designed to protect the British economy from the worst consequences of the crash. On December 6, 2007, the bank lowered rates to 5.5%, eventually taking its base rate to just 0.5% less than two years later.
You maybe one of the 8 million adult Brits who have never witnessed an interest rate rise from the Bank of England!
The 10-year anniversary of July 2007's hike comes at a time when the bank is seriously considering increasing rates once again. Granted, the move will be from 0.25% to 0.5%, not 5.5% to 5.75%, but it will be a significant step towards normalising monetary policy, which has effectively been in emergency mode for the last decade.
What does this mean if you have a mortgage?
10 years ago, the average 2-year fixed rate was 4.99%: today many of us enjoy rates of 2.5% or below. Translating this into real monetary value, the average £200,000 mortgage would have cost £415 per month extra in interest charges. How could you cope with this sort of an increase in your monthly expenditure?
With the last Bank of England monetary policy committee starting to consider a rate increase as a viable option to economic stability, now could be the perfect time to tie into a fixed rate mortgage and, with the instability of Brexit looming large on the horizon, a five-year fixed rate mortgage may be the best option. Rates are still at an all-time low so… snap out of the lethargy that may be causing you to delay the positive move of reviewing your mortgage. Believe me, when the Bank of England does start to increase interest rates, the mortgage rates available to you will be heading in the same direction.
If you’d like a chat, give our mortgage guru Matt at Zing a call 01375 311028