The Bank of England has just voted to hold the base rate at 3.75% for the second consecutive meeting. For millions of homeowners waiting for rates to drop back to 1% before remortgaging, the reality is setting in: the era of ultra-cheap money is definitively over.
Geopolitical tensions and sticky inflation have forced the Monetary Policy Committee into a corner, and hoping for a return to 2019 mortgage rates is now a dangerous financial strategy.
Historically, a 4% to 5% interest rate is entirely normal. The anomaly was the decade of near-zero rates following the 2008 financial crisis. With the Bank of England maintaining a cautious stance amidst energy price shocks, homeowners must recalibrate their long-term cashflow models to assume mortgage rates will hover in this band for the foreseeable future.
If your fixed-term mortgage is ending in the next 12 months, trying to time the market by switching to a tracker mortgage and 'waiting' for rates to drop is a massive risk. Some financial markets are even pricing in potential hikes if inflation spikes again.
Instead of gambling on macroeconomic policy, focus on what you can control. Review your Spending Plan, identify areas of wealth leakage, and ensure your cashflow can comfortably absorb the new higher rate. If you are a high earner, run your numbers through our Wealth Leakage tool to ensure your long-term wealth building isn't derailed by your mortgage payments.
Apply this strategy to your own finances using our interactive tool below.
Enter your numbers to reveal the lifestyle creep silently eroding your high income.
Stop reading and start acting. Book a zero-obligation Chemistry Call to discuss how we can apply these frameworks to your specific situation.
