MTTM Podcast Episode 541 – Rising Mortgages & Energy Bills: How to protect your money

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The impact of global volatility on mortgage and interest rates

Summary:

We discuss the sudden shift in the UK mortgage market following the conflict in the Middle East. While markets previously anticipated interest rate cuts, the threat of Brent crude oil prices sustaining levels above $100 a barrel has sparked fears of a fresh inflation shock. This has led to a repricing of the Bank of England base rate expectations, with lenders already increasing rates on fixed-term products. We explore the options for those remortgaging soon, including the benefits of product transfers and shopping around early.

Key Insights:

• The $100 oil threshold - If Brent crude remains above $100 per barrel for a sustained period, it could trigger a global inflation shock similar to 2022.
• Base rate predictions reversed - Market expectations have shifted from an 80% chance of a rate cut, to predictions of a potential rate hike, with the base rate expected to stay around 4% or higher over the next five years.
• Mortgage rates are climbing - Best-buy fixed rates have already increased by approximately 0.2% in recent weeks, with 2-year fixes at 60% LTV now starting around 3.63%.
• Lock in deals early - Borrowers can often secure a new mortgage rate up to six months in advance. This allows you to hedge against further rate rises while maintaining the option to switch if rates happen to fall before your current deal ends.
• Product transfers vs. Remortgaging - A product transfer with your existing lender is often simpler as it requires no new affordability checks, but a mortgage broker can help determine if a better deal exists elsewhere in the wider market.

Energy market shift: From price drops to future hikes

Summary:

We look at the changing narrative in the energy market. Although the Ofgem energy price cap is set to fall by 6.7% in April, the recent spike in wholesale energy costs has led to many competitive fixed-rate tariffs being withdrawn or increased. We examine the latest predictions for the July price cap and discuss the importance of checking for exit fees when considering a switch.

Key Insights:

• Short-term relief - The April energy price cap reduction to £1,641 (for a typical dual-fuel household) may be temporary, with predictions suggesting we could be set for a 16% increase in July.
• Fixed tariffs are rising - Several providers have recently increased their fixed-price offers by over £100, while dozens of other deals have been pulled from the market entirely.
• The 10% rule - Given current predictions (with July cap estimates ranging from £1,813 to £1,913), households should budget for energy bills to be roughly 10% higher than they are now.
• Internal switching benefits - Many providers waive exit fees if you switch to a different tariff within the same company, allowing you to secure a new rate without a financial penalty.
• Changes to exit fees - Some providers, such as Octopus Energy, have started to introduce exit fees for new customers due to increased market volatility, highlighting a shift in industry standards.

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