Mortgage rates to rise after inflation shock
HOMEOWNERS are being urged to act quickly to fix their mortgages, as higher prices pose a threat to those on variable interest rates.
Inflation, as measured by the Consumer Price Index (CPI), leapt up to 2.9 per cent from 1.9 per cent in November and is the biggest monthly increase since records began.
Brokers are warning that soaring inflation could mean higher mortgage rates.
“The latest figures will bring an end to the ‘rate complacency’ we have seen over the past year or so,” said Andrew Montlake from Coreco. “Many borrowers have been banking on low rates in the short term, but this is risky.”
He adds that more people than ever are on variable-rate mortgages — either because they cannot remortgage, or because they have decided not to.
“If rates rise, many borrowers will find themselves with significantly higher monthly payments,” added Montlake. “Many who should be fixing are leaving it dangerously late.”
Melanie Bien from broker Savills agreed that those who wanted the security of a fix needed to move “sooner rather than later”.
“It is worth considering a five-year rather than a two-year fix,” she said. “With a two-year, you could be coming up to remortgage again when rates are higher.”
