Homebuyers urged to act fast ahead of expected interest rate rise

Homebuyers and existing homeowners who wish to re-mortgage their property might wish to act fast to secure an attractive fixed-rate deal, after reports emerged suggesting that UK interest rates will ‘almost definitely’ be increased before the end of the summer.

The news follows the publication of IHS Markit’s latest Purchasing Managers’ Index (PMI), a monthly assessment of UK economic growth across various industries.

The group’s glowing report for June, which revealed stronger than expected growth in the service, construction and manufacturing sectors, is fantastic news for the UK economy.

However, following the news, This Is Money magazine – along with other media outlets – is warning that the Bank of England (BoE) will now almost certainly move to increase interest rates in August.

Naturally, this would have an adverse effect on mortgages, affecting anyone who currently holds a variable rate or tracker mortgage on their property. It would also eventually filter into the wider mortgage market as a whole, as lenders move to pass on the cost of the rate rise to borrowers looking to secure a new mortgage, or to homeowners who wish to re-mortgage their existing property.

Traditionally in this kind of situation, homebuyers will move fast to secure an attractive fixed-rate deal with a low monthly repayment rate before rates are increased – something which real estate agents and property experts have long hailed as a smart move.

Back in May, the BoE’s Monetary Policy Committee (MPC) decided to hold the Bank’s base rate at its current low of 0.5 per cent – but BoE officials have repeatedly said that an interest rate increase will be imminent as soon as the UK economy begins showing signs of growth.

Meanwhile, the latest PMI indicates that the UK economy grew by approximately 0.4 per cent in the second quarter (Q2) of 2018 – up from 0.2 per cent the previous quarter, making a base rate rise look increasingly likely.