Following the rise in the Bank of England interest rate to 0.75% at the beginning of August 2018, many commercial mortgage borrowers are looking at fixing their mortgage interest rates.
If interest rates rise again, mortgage payers are faced with increased mortgage payments if they do not have a fixed rate mortgage. One option is to remortgage with a fixed rate mortgage of two to five years. With a fixed rate, the borrower knows that they will not have to make increased mortgage payments for the length of the fixed period.
There are alternative strategies. It is possible to fix half of the loan so that 50% is on variable interest rates terms, and the other half has a fixed rate. If interest rates drop, the repayments will decrease. If interest rates go up, half of the mortgage is protected from interest rate increases.
A borrower may be able to find a mortgage at a cheaper interest rate, but there could be early repayment fees on the existing mortgage when switching mortgages.
Some borrowers have arrangements with their lenders to overpay each month. They pay at a level equal to interest rates rising by a few points. If interest rates go up, they continue paying the same repayments. This makes it easier to accurately budget for mortgage payments.
It is predicted that interest rates will rise again within months making this perhaps a good time to seek advice on all the options available to manage commercial mortgage interest rates.