How to safeguard against interest rate rises
Published ¤ 14/08/2009
With the Bank of England base rate at an all time low, many of us are enjoying unprecedented low mortgage rates. However, rates WILL go up again. So, how do you safeguard against these increases?
Property prices have fallen considerably since their peak 2 years ago, leaving many people with little or no equity in their property, or property portfolios. What thismeans is that people are now finding difficult, if not impossible, to switch their mortgage onto a decent fixed rate.
Larger companies have always had the ability to "hedge" their interest rates, effectively offering them security against future rate rises. Wouldn't it be great if you could do this with your mortgages?
Well, now you can! We have developed partnerships with companies that can provide a "cap" for you existing mortgage. So, even though you may be enjoying a fantastic rate now, we can offer security and peace of mind for the future. This is regardless of level of equity you have in your property (even if it is 100%+), regardless of your income, and NOT dependent on the rental income for BTL properties.
So, how does it work? Well, very simply, you pay a premium and the company assumes the risk of future rate rises. If the base rate rises above the cap, then the company will make up any excess. So, for instance, if your current rate if 1% over BoE base rate (currently 0.5%) then you will be paying 1.5%. By securing a base rate cap at 1.5% for 2 years, you can be certain that your mortgage rate will not exceed 2.5% (1% over 1.5%).
To give you an idea of what could happen to base rates, over the last 10 years the average Bank of England base rate was just under 5%. Over the last 25 years the average was 7.61%. How would you cope if the base rate shot up again?
If you are concerned about rising interest rates, then why not give us a call to discuss your options in more detail. Alternatively, click here to send us a message.
Fix your base rate now!
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