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The Base Rate of Interest, set by the Bank Of England, is at the lowest level ever in the UK, and many people are sitting pretty on their lenders standard variable rate paying less than they have ever had to pay before on their mortgage. But how long will this ‘payment holiday’ last?

With the Base Rate of Interest currently set so low there is surely only one way it can go when it does change; and that is upwards. The Bank of England has held the Base Rate at the 0.5% level for over 18 months now, despite increasing Inflation Rates which would normally lead to Interest Rate hikes. With the economy still so fragile, and looking likely to remain that way for some time, the Bank of England are holding the Interest Rates down to protect consumers against an increase in the cost of their mortgages and to encourage people to spend money, to keep cash rolling through the economy.

Although everyone is in agreement that Interest Rates will increase, the real questions is a matter of time i.e. when will the Bank of England decide to make the change. So the million dollar question for the many mortgage holders in the UK that are currently enjoying low variable rate mortgage payments is whether they should stick or twist. i.e. should they wait it out longer on their low variable rate, or grab a Fixed Rate now before the inevitable interest rate hikes kick in.

So what exactly is the risk of waiting? The primary risk with waiting too long is one of supply and demand. There is less money available to mortgage lenders to provide to people wanting mortgages. Therefore, if you wait too long there is a risk that you will get caught in the ‘panic buying’ rush when everyone starts to come forward to apply for fixed rate mortgages. Demand will rocket when that starts to happen, and lenders will either close the doors to new business or more likely hike the cost of their fixed rate mortgages just because they can.

What is the risk of fixing now? Going in too early may mean you regret not waiting longer, particularly if interest rates are held at 0.5% for another 6-9 months.

However, for those sitting on standard variable rates there is one thing I can say for certain. If you want to fix your mortgage, and you see an attractive fixed rate deal available now, my clear advice would be to snap it up. Then you can forget about it, enjoy a competitive fixed rate that you are happy with, and leave the worry to the other millions who are still playing the waiting game.

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