When a lender determines what it costs to borrow money they use a governmental based interest rate called the standard base interest rate. The Bank of England has a committee made of financial experts that understand both the side of borrowing as it pertains to a consumer as well as what the borrowing cost means to the health of the financial market in the UK. The committee is called the Monetary Policy Committee or the MPC. The MPC has many responsibilities, but one of the most well-known is the setting of the standard base interest rate or base interest rate as it is sometimes called. The base interest rate is set by the MPC to control the economic rate of inflation encountered by consumers.
The standard base interest rate is what lenders will use to determine their lending rates. Monthly the MPC meets to determine what the rate will be and whether to increase the rate or decrease the rate or to leave it unchanged. How high or low the base rate is will impact the lender’s determination of their own interest rates offered with a remortgage.
When a homeowner is seeking a remortgage they should be aware of the MPC’s potential in raising or lowering the base interest rate in the near future. If they are expected to lower the interest rate then a homeowner could benefit by waiting until the rate is lowered by the MPC since they would obtain a lower remortgage rate. If the MPC is expected to raise the base interest rate then the homeowner will be offered higher interest rates from lenders at a later date.
If a homeowner is considering either a fixed rate or a tracker rate remortgage then they should be aware of the current base interest rate and its potential for rising or falling. The fixed rate is determined according to the current standard base interest rate but will be fixed and stay the same for a term or period of time. The tracker is tied to the base interest rate and the lender will raise or lower the remortgage’s interest rate up or down a predetermined percentage according to the rise or fall of the standard base rate over a set time period.
The economic conditions and the possibility of a rise or fall in the MPC’s standard base interest rate will help a homeowner and their remortgage broker or lender determine the most likely remortgage deal that will best benefit their situation.
