Take advantage of competitive fixes: Smith

Take advantage of competitive fixes: Smith

Advisers and consumers should not become complacent about consistently low bank base rates, Stephen Smith, director for Legal & General Mortgage Club and Housing has warned.

Although the Bank of England’s monetary policy committee has kept the base rate at 0.5 per cent again this month, Mr Smith warned it did not mean that banks and other lenders would not increase their interest rates.

Mr Smith said: “Banks do not just look at the base rate when deciding the rates they offer to consumers: they also look at swap rates, which can be volatile.

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“The average rate offered on a two-year fix over the past three years has fluctuated by 1.4 per cent and the average five-year fix has moved by 1.3 per cent in the same period.”

Despite admitting there were some competitive deals at the moment, Mr Smith added: “Anyone thinking about moving house or coming to the end of a mortgage deal should speak to a mortgage adviser now about which deal would be right for them.

“Those who wait until interest rates start to rise risk missing out on the best deals as bank will raise their rates long before the Bank makes an announcement.”

Adviser view

In a client newsletter, Devon-based Continuum Financial Services said: “By locking in to a low rate now, clients may find themselves in a position to save a little extra each month.

“Then, by the time the fixed rate expires, they may have a small sum with which to make an overpayment on the mortgage, which will help to reduce the debt and take the sting out of any increased rates they might then have to pay.”