Many consumers could experience problems with remortgaging
September 16, 2008
Some industry officials have expressed concerns that many people who are hoping to remortgage over the coming months could experience severe difficulties, not only because of the lack of mortgages on the market at present but also because nobody seems to have any real indicated of what will be happening with the interest rate, which makes it difficult for consumers to determine what sort of product they should opt for when they remortgage.
Just a few months ago most people, including industry officials, were pretty certain that the interest rate was going to keep falling over the course of this year, with the base rate already having fallen three times between December and April.
However, the level of inflation has now soared way out of control, rising to 3.8 percent, which is nearly double the target inflation rate of 2 percent set by the government. This means that the likelihood of interest rate drops has been cut dramatically, and some are concerned that interest could even rise.
One industry official said that he did not think that the base rate would rise, stating: ‘I’m not convinced base rate will rise. Even if it does, it may go up only by a quarter of a point, and the Bank of England will have to cut it again next year. Two-year fixes are taking account of bigger rises, while the price of trackers hasn’t changed. Unless you absolutely need the security of a fix then trackers look better value.’
Another official said: ‘If you are OK knowing you must stick to the deal or pay redemption penalties, then go for a fix.’
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