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Reaction to the latest interest rate rise

To keep up with rising inflation, the Bank of England Monetary Policy Committee (MPC) has announced the latest interest rate rise, by 0.25% to 1.25%. This is the fifth consecutive interest rate rise announced by the MPC.

Thomas Jackson, Managing Director at Cooper Associates Mortgages, explains what impact this has for mortgage-holders, along with tips on how to best manage the impact of the latest interest rate rise.

“House prices in the South West rose higher than anywhere else in the UK last month, with the exception of Northern Ireland. An increase of 14.5% now puts the average house price at £305,173.

This isn’t sustainable. As the cost of living grows and people begin to feel the squeeze, confidence will falter and the growth in house prices will have to slow. The short-supply of housing stock has helped to keep property prices rising, but as getting a good mortgage deal becomes ever-more difficult, many buyers will choose to stay put – or find themselves priced out of the market.”

So, what can you do to manage your mortgage when interest rates rise? Thomas says homeowners should consider the following:

1. Know your mortgage

There are lots of different types of mortgages and these will be affected differently by interest rate changes. Check your paperwork or speak to your mortgage provider to determine how you might be impacted.

2. Make overpayments

If you’re on a fixed rate mortgage, rising interests rates won’t affect you – yet. If you can afford to pay more than your monthly payments, take advantage of your low rate while you can and pay in extra so that when it is time to find a new deal you will need to borrow less.

3. Build your credit score

Interest rates might not affect you immediately, but they will when the time comes to find a new mortgage deal. If you’ll be looking for a new mortgage in the next 12-18 months, try to build up your credit score now so you can secure a better deal in the future.

4. Get expert advice

If your mortgage repayments are set to increase and you are worried about how to afford them, seek advice. You can speak to a free debt adviser even if you do not yet have any debts and they can help you to manage your finances.

5. Plan ahead

Anyone with fixed rates maturing before March 2023 should begin the process of remortgaging now. Most lenders provide a six-month window, with many applying the rate from offer as opposed to application. Lenders are changing their rates on a much more frequent basis at present, with many making increases to their products in anticipation of this latest rise in interest rates.

6. Get the best deal

Most people go to the bank when they need a mortgage, but this is rarely the best deal on offer. Cooper Associates offers free mortgage advice to clients, and because we are independent, we can access the entirety of the market. This ensures our clients always get the best deals.

Thomas warns, “Overpaying or switching your mortgage may incur fees, so always check with your mortgage provider first.”

Thomas Jackson

Thomas Jackson, Managing Director of Cooper Associates Mortgages

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