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Mortgage rates are likely to rise again after the latest comments from the Bank of England, a rise in the Bank's base rate from 0.5% to 0.75% is likely in May, with another rise expected to follow in the Autumn. In addition to this, two government schemes that currently offer lenders access to cheap funding are due to end this year and the Association of Mortgage Intermediaries agree that these schemes have helped keep rates low in recent years.
In terms of interest rate rises, borrowers with variable rate mortgages or a tracker rate mortgages will be most affected as the monthly payment amount will increase. Those with fixed rate mortgages would not see an immediate rise in their monthly payments however, when such borrowers reach the end of their term, they may find they have to make higher monthly payments. That said, depending on when they took out their loan, they could end up on a cheaper deal due to the competitiveness of the fixed rate market.
In terms of the Funding for Lending Scheme and the Term Funding Scheme which were introduced by the government, most mortgage experts do not think that there will be an instant effect on mortgage rates due to the way the schemes are structured, but we may see rates gradually drift upwards. Of course, there is always the option for the government to extend one or both schemes as it has done previously if they perceive it is beneficial to do so.
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