Industry figures say the latest Bank of England base rate hike will refuel the debate over whether borrowers will opt for the safety of fixed rate mortgages.
The Monetary Policy Committee last week voted to raise the interest rate by 0.25% to 4.5%, the second rise in two months. The previous change in rates was an increase of 0.25% to 4.25% on May 6.
A statement from the Bank says: “A small and diminishing margin of spare capacity means inflationary pressures are likely to continue building. Against that background, the Committee judged that a further increase of 0.25% in the repo rate to 4.50% was necessary to keep CPI inflation on track to meet the target in the medium-term.”
John Brian, remortgaging specialist at homefast, says: “Following this rise and with interest rates expected to exceed 5% by the end of the year there is a huge incentive for people to remortgage. The most popular deals are likely to be short-term fixes.”
But Ray Boulger, senior technical manager at Charcol, says: “The money markets expect the rate to peak at around 5.5% next year and lenders have factored both this and future expected rises into today's fixed rate deals. This rise therefore shouldn't panic borrowers into taking a fixed rate. Overall, capped trackers look better value.”
And Simon Jones, director at Savills Private Finance, says: “Those borrowers who have opted for a tracker mortgage are aware from the outset that their mortgage will move with the base rate whereas those on discount deals take more of a risk.”