No matter what happens this week, interest rates are only going in one direction.
Concerns around spiralling prices – with inflation now predicted to hit 4 per cent or even 5 per cent – saw speculation about an imminent base rate rise reach fever pitch after the Budget.
But even if the Bank of England holds off pushing the button tomorrow, it is only a matter of time.
Rates threat: For millions of families, their mortgage is their largest monthly outgoing. So any increase, no matter how small, will be painful
Interest rates have been at a historic low of 0.1 per cent since the start of the pandemic.
Before then, they hadn’t crept above 0.75 per cent since the financial crisis more than a decade ago.
So rumblings that in a worst-case scenario, rates could rise to 3.5 per cent in 2023 is enough to send a small shiver down anyone’s spine.
Even an increase to pre- pandemic levels will prove deeply unpopular among households already feeling the squeeze amid other bill hikes and tax rises.
Yes, it’s true that in the ten years preceding the credit crunch, interest rates were around 5 per cent on average. And there will be many who remember all too clearly the days when rates rose above 15 per cent.
But this context offers little comfort to those whose finances have already been pushed to breaking point during the pandemic.
For millions of families, their mortgage is their largest monthly outgoing. So any increase, no matter how small, will be painful.
Yet it’s important to remember that mortgage rates are still incredibly cheap. And while we may not ever again see a price war on the scale we saw this summer, you still have time to lock into a great deal.
Major lenders have pulled many of their cheapest offers ahead of an expected base rate rise. But as we report, you can still get a five-year fix at around 1 per cent.
Of course, the lowest rate doesn’t necessarily translate into the best deal; this depends on the lender’s fees and how much you are borrowing. But it does show there are still brilliant bargains to be had.
So if you are sitting on your lender’s standard variable deal, contact a mortgage broker today to find out if you can switch to a cheaper deal.
Those on trackers who have no plans to move home in the near future may want to consider a fixed mortgage instead — particularly if you do not have to pay any early exit fees to leave.
If you are already safely locked into a cheap fixed deal, consider if you can afford to overpay a little each month.
Increasing the amount of equity you have in your home will ensure you are in the best position when you come to remortgage in the future, when home loans could be much more expensive.
It is unlikely mortgage rates will be this cheap again for a very long time. And while there is no need to panic, now is the time for action.
Be festively frugal
The week after the clocks go back is usually when I start thinking seriously about starting my Christmas shopping. If I don’t get organised early, I end up panic-buying, spending far more than necessary.
But this year, shortages or not, I’m determined to take it easy.
After the festive season was all but cancelled last year, many families will feel under pressure to make this Christmas their best ever.
But like lots of people, all I really want is to be able to enjoy a few laughs (and drinks) with loved ones.
And with household budgets feeling the strain, why go overboard? Last year, my friends and I decided to ditch gifts in favour of a donation to our favourite charities — a tradition I’m keen to repeat.
I’d love to hear your festive spending plans. Write to me at the email address below.
Speaking of Christmas presents, one Money Mail reader from Bicester, Oxfordshire, suggests that with gas prices soaring, energy firms should consider launching a range of gift cards — ‘So you can really send warmest wishes to loved ones,’ she says.
It might not be the most exciting present to unwrap, but I’m sure it would be gratefully received.
Perhaps you could go all out, and include a new woolly jumper or fluffy hot water bottle, too.
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