Homeowners are being urged to consider locking in with a low fixed-rate mortgage, as the price of home loans may soon surge. This is because the price of mortgages partly reflects the Bank of England base rate – currently at record lows of 0.1%. When interest rates were slashed from 5.5% to 0.5% during the financial crash 13 years ago, many assumed that the drop would be temporary. The UK had never had a base rate so low, and because rates had fluctuated between 4% and 7% since the early 1990s, analysts and bankers alike assumed the central bank would increase the rate again within a few years. Due to the slow economic growth that followed, however, the Bank of England’s base rate stuck at 0.5% for seven years before a small fluctuation and then dropped to a record low of 0.1% last year as the UK grappled with the coronavirus crisis. But Bank of England governor Andrew Bailey warned that this rate could rise next year to help offset rising inflation. But homeowners could hedge against this by taking out a fixed-rate mortgage.. Doing this soon would mean being protected for longer if the UK base rate does go up next year – and mortgage rates with it. When you come to the end of your fixed rate, you can go to a lender and fix a deal six months in advance. Being able to prepare and look at your options now is important. Fixed-rate mortgage prices are heavily affected by swap rates – the rate at which mortgage lenders borrow money from one another. When swap rates fall, so do fixed-rate mortgages. It’s not an exact system, but it’s a good rule of thumb. As swap rates have been so low this year, and for most of 2020, fixed-rate loans are falling in line with this.

Past performance is not a reliable guide to the future. The value of investments and the income from them can go down as well as up. The value of tax reliefs depend upon individual circumstances and tax rules may change. The FCA does not regulate tax advice. This newsletter is provided strictly for general consideration only and is based on our understanding of law and HM Revenue & Customs practice as of October 2021 and the contents of the Finance Bill. No action must be taken or refrained from based on its contents alone. Accordingly, no responsibility can be assumed for any loss occasioned in connection with the content hereof and any such action or inaction. Professional advice is necessary for every case.