If you've been on a variable rate mortgage over recent years the chances are that you have benefitted from low repayments. But, as the British economy starts to recover, are your mortgage costs set to rise in 2014? A base rate rise is surely inevitable and, even if this doesn't happen in 2014, could borrowing costs increase anyway?
Market predicts base rate will remain the same until 2015
The Bank of England base rate has now been at its record low of 0.5% since March 2009. Millions of homeowners have seen their mortgage repayments fall to record lows although savers and pensioners have been hit hard by low returns.
On taking over as the Governor of the Bank of England, Mark Carney indicated that the Bank of England wouldn't raise the base rate until the UK's unemployment level fell to 7%. Originally, the Bank's economists predicted that would be in 2016, although recent figures suggest this may happen sooner. The most recent data showed that unemployment has fallen from 7.8% to 7.4% in 2014, suggesting the benchmark may be reached more quickly than expected.
In early December, the money markets suggested a first rise midway through 2015. The Daily Telegraph agrees, saying that "most commentators feel the Bank is highly unlikely to act next year, even if that 7% landmark is breached".
Mortgage rates set to rise in 2014
Even if the base rate doesn't rise in 2014 - and most experts believe that it won't - the cost of mortgages could still rise in 2014. Keith Osborne, editor of Whathouse.co.uk, says: "For the next few weeks I expect interest rates to remain low as more and more lenders enter the Help to Buy scheme. Demand for mortgages is set to be strong in the spring and this should generate a good level of competition.
"However, the government has removed access to cheap money for mortgages through the Funding for Lending scheme and this is set to result in higher costs for banks and building societies in due course.
"If you then factor in a brand new set of market regulations scheduled for April I would expect rates to creep up as the summer approaches. What all this means is that it could well pay to take advantage now of some of the excellent mortgage deals still available.".
Click here to find out more about how Whathouse.co.uk can help you find the right mortgage.