Reprieved for now, but rate rise is on the way
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For the seventh month in a row, the Bank of England's Monetary Policy Committee voted to keep the cost of borrowing on hold at 4.75 per cent.
However, the announcement on Thursday failed to quash widespread speculation in the housing industry that rates will go up at some point this year.
"This is only a temporary reprieve," says Simon Tyler, spokesman for broker Chase de Vere Mortgage Management. "Rates could rise as soon as next month, but it should only take one or two rises at most to curb any increase in inflation."
The anticipated rate hike has already been priced in by the money markets, where lenders borrow from each other. As a result, there has been a marked decrease in cheap two-year fixed- rate deals, says Mark Chilton of broker Purely Mortgages.
But concern should really be felt by those on their lender's standard variable rate (SVR), since they are exposed to further base-rate rises, Mr Chilton adds. "Borrowers on variable rates should think quickly about remortgaging to a good fixed deal while they are still low."
Whether borrowers go for a fixed or discounted variable-rate deal at this time must come down to individual judgement. If you think rates are on the way up, you might prefer a fixed deal. But if you think they will come down in the long term, a discounted or tracker product may be more suitable.
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