Should you renew your mortgage early as rates continue to go up?

For anyone with a mortgage, or looking for one, these are scary times.

Interest rates are on the way back up – and the only question is by how much, and how fast. So what’s going on, and do you need to panic?

I won’t pretend we are not in a fix right now, and I know that a big hike in monthly mortgage repayments feels like a world of pain on top of rocketing energy and food bills.

I am a campaigner for paying attention to our finances. But I also believe it’s sometimes unhealthy to pay too much attention.

I was laid low with a virus the week of Kwasi’s mini-Budget, just as a cascade of requests for comment from broadcast media landed on me – great timing, huh – so I watched as the media coverage of the current financial drama unfolded. Sorry to say there was far too much instant knee-jerk reaction from non-experts, and that’s never helpful.

Let’s rewind. The Bank of England hiked the base rate by 0.5% to 2.25% on September 22. Then those shadowy actors known as ‘bond markets’ decided that due to uncertainties surrounding the government finances, the pound had become more risky.

That explains why the pound ‘crashed’ (though quickly rebounded) – it means bond investors are clamouring for a higher rate of interest to invest in government debt.

That in turn means base rates are bound to rise again when the Bank’s monetary policy committee meets next, on November 3.

The mortgage lenders meanwhile feared rates now had rocket fuel under them, not a gentle push upwards, so their deals would have to be repriced.

By midweek, more than 900 mortgage products had been withdrawn from the market – but most reports didn’t say that left 2,661 deals still available.

The main casualties were the fixed-term deals which come with a lower headline rate but a thumping fee. You typically have to add another £1,000 or £1,500 to your loan to secure one – every time you remortgage.

My own two-year mortgage with Halifax will expire next June. Help!

I immediately began to wonder whether I should try to jump to a new deal, and stump up a big early repayment charge, before the ‘crisis’ gets worse.

Aaron Cresswell at mortgage brokers Trinity Financial commented: ‘A huge number of people have been paying early repayment charges. It would appear that rates will continue to go up.’

My mortgage rate is 1.31% (happy days) and last Friday the Halifax lifted its two-year rate to 5.36%. Their lowest rate now is the Halifax’s lowest two-year rate is as I write is 5.06%.

Meanwhile, the Bank’s rate-setters meet again on December 15 (merry Christmas!), February 2 and March 23. I’ll be gritting my teeth…

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