Anyone remortgaging faces a difficult decision: do you believe the Bank of England in judging when rates might go down, or the financial markets?
Because the markets are saying that the base rate (the official rate of interest) will decrease next year, possibly several times, but Andrew Bailey, the Bank’s Governor, is making it clear that he doesn’t think you should bet your mortgage on it.
The minutes accompanying the Bank’s decision to hold illustrated that its economists did not spend much time thinking about cutting rates, but did spend quite a bit of time considering the case for an increase.
Three members of the nine-strong committee were worried enough to vote for an increase.
Mr Bailey, in a letter to Jeremy Hunt, said he planned to keep rates “restrictive for an extended period of time”.
So if you’re a gambling person the most likely next change the Bank will opt for is an increase rather than decrease.
And what this means if you have a mortgage is that now is not the time to hope for the best, especially if you don’t have much equity.
The situation for mortgages is improving – we are now seeing home loan rates that start with a “4”. But the average two-year fix is still 5.98 per cent.
This suggests people with equity are managing to get more manageable rates (depending on the size of your loan) in a way the rest aren’t.
It’s sensible to plan for what realistically is about to happen. This means that at present, you will get a mortgage of 5 per cent or just under if you have 40 per cent deposit or equity, or up to 6 per cent if you don’t.