The Bank of England has hinted that it could raise interest rates for the first time in a decade to curb inflation, with economists predicting a hike could come as soon as November this year.

In the minutes of its latest Monetary Policy Committee meeting, the Bank said: “A majority of MPC members judge that, if the economy continues to follow a path consistent with the prospect of a continued erosion of slack and a gradual rise in underlying inflationary pressure then some withdrawal of monetary stimulus is likely to be appropriate over the coming months to return inflation sustainably to target”.

Members of the MPC voted by a majority of 7-2 to maintain interest rates at 0.25%.
However, the Bank said that the decision to raise rates would not only depend on inflation but also on the continued strength of the economy. Today’s decision comes after the Office for National Statistics revealed that that inflation rose by 2.9% in August, up from 2.6% in July – equalling the four-year high hit in May this year.

In August, the MPC forecast two rate hikes over the next three years, with the first not until the third quarter of 2018. Today’s announcement suggests there could be a hike far sooner than this.

This all means for the expat mortgagee that interest rates are very likely to increase sooner rather than later. So, very good advice would be to review your current mortgage deal to ensure it is right for your long-term future.

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The mortgage market in Britain is experiencing a notable change as the reasons why expats re-mortgage evolves. Expat UK home owners are moving away from short term deals and variable rates onto five-year fixes at low rates in moves to guarantee certainty and financial security, according to the latest reports.

Just 18% of expat owners re-mortgaged to lower their monthly repayments in July compared to 21% in June. 15% re-mortgaged to increase the size of their overall loan in July, a fall from 19% in June.

The analysis suggests that instead of re-mortgaging to lower monthly repayments or borrow extra money, home owners appear to be nervous about interest rates increasing and re-mortgaged onto long term deals for certainty and financial security. Just 2% of re-mortgagors predict interest rates to fall in the next year, with the remaining 98% expecting rates to either stay the same or rise.

Over a third, some 37% fixed onto a longer-term deal in July, the greatest since numbers were first tracked, and a significant increase from 7% who previously had a fixed five-year product.

This is a meaningful change in expat behaviour when re-mortgaging. Typically, over the last year, people were re-mortgaging to save on their monthly repayments or borrow additional funds. Instead, with rates low and expectations of a rate rise high, expats are fixing for longer for added financial security.

Expats it would seem are taking shelter from future rate rises and preparing for potentially turbulent times to come. The way people borrow is changing, there is a significant decline in interest-only and variable rate deals, and fixing for longer appears to be the top priority.

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