Duncan Farmer considers the effect of the predicted Bank of England interest rate rise.
In the next six weeks or so we will learn whether, as widely predicted, the Bank of England’s monetary policy committee will add another quarter or half point to its interest rate. Although all expectations are that there will be rise in May and probably another one in November, there remain many good fixed-rate deals out there. Yorkshire building society, for example, has a two-year rate of 1.24 per cent and HSBC’s best offer is 1.32 per cent. If you are looking for longer-term security HSBC again has a low offer – 1.71 per cent for five years compared with 1.84 per cent from Yorkshire building society. All loans are for borrowers with at least a 35 per cent deposit.
The number of borrowers in arrears on their mortgage rose slightly according to the latest from UK Finance, the umbrella group for the financial services industry, but the overall number is still comfortably under 100,000. The number of properties repossessed is a small fraction of that – at about 2,000, although behind the statistics will be harrowing stories of people losing their home because of, probably, unforeseen financial tragedy. The advice from UK Finance is simple: “We expect the vast majority of mortgage borrowers to continue to manage their finances successfully but they should continue to keep their plans under review. Any customer who thinks they may experience payment difficulty should always speak to their lender at the earliest opportunity. Lenders remain committed to working with borrowers to keep them in their home wherever possible, and possession continues to be the last resort.”
An increasing number of people – especially young people – are switching from traditional banks to digital-only lenders who operate solely through an app and have no physical high-street presence. Monzo, for example, claims to have 500,000 customers. Their overdraft fees and other charges are often lower than some of their old-fashioned peers, and although most have high security and are covered Financial Services Compensation Scheme few yet pay decent savings rates or offer mortgages. One that does is called Atom, which allows you to track your mortgage application via its app, but ironically at present you have to go through a broker rather than direct.