One story has been leading the news in terms of mortgages in the UK this week, and it concerns the potential rise in interest rates. Originally it was mooted that interest rates would not go up until 2016. However this was stated prior to the news that the Funding for Lending scheme would finish at the beginning of 2014.
While it is impossible to say what will happen for certain, there is a reasonable chance that interest rates could indeed increase. Rates have been incredibly low for a long time now, and there has to come a time when they will start to rise again. Will that time be in 2014?
Consumers are concerned
A recent report released by the Building Societies Association revealed many people are concerned about the potential rise in interest rates. More than a quarter of those surveyed for the report (27%) said they were concerned that interest rates could go up, making it more expensive to meet the monthly mortgage payments.
This was also borne out by the survey, with nearly half of those questioned (46%) saying they were concerned about how affordable the monthly repayments would be if they were to try and get a mortgage.
This dovetails with the advice given by the Governor of the Bank of England, Mark Carney, a couple of weeks ago. He advised people who wanted to buy a house to ensure they could pay the mortgage every month and not to stretch their finances too far. Concerns over rising energy bills and the cost of living have also added to consumers’ woes in the past months.
Is this the time to get a fixed mortgage deal?
The good news is there are lots of fixed deals on the market at present. Many experts have been advising home owners to look at the available deals and to choose a fixed rate deal now. This will secure that particular interest rate for two or three years, depending on the particular offer quoted. This will certainly provide some peace of mind for those who are looking to buy or who already have a variable rate mortgage.
It is worth noting however that even if we see a rise in interest rates in 2014, they are very unlikely to rise steeply. The state of the housing market might prompt an increase in interest rates but this increase could well be very gradual. This means people would have time to look for a better mortgage interest rate to secure more affordable repayments over the next couple of years.
All in all it makes sense to be cautious and to ensure you don’t borrow more than you can comfortably afford if you are looking to buy a house in the near future. It is not always necessary to feel enslaved by interest rates, even if they should start to rise in 2014. More than anything, it will be interesting to see how the demise of the Funding for Lending scheme will affect the market.