Is now a good time to remortgage?

Many pundits are predicting no immediate change for UK interest rates, but anyone about to take out a home loan or looking for a remortgage should be prepared for a rockier ride as the year progresses.

The latest decision on interest is to be announced by the Monetary Policy Committee (MPC) today. Although it is not expected that they will impose a rise this time, it does seem likely that an increase will happen later in the year.

"I think it is likely that rates will rise, and while I don't think house prices will fall, they cannot continue to rise at current levels," says David Hollingsworth, mortgage specialist with brokers London & County.

He says new buyers need to think carefully about the type of mortgage that suits current volatility. "Fixed deals are currently proving popular. But, it's important to think about when you are likely to move, as if you plan to up size there can be problems being tied in. A two-year fixed deal would suit someone who wants to avoid this."

Jason Clarke, a spokesman for the UK's largest lender, Halifax, said fixed rate deals were ideal for first time buyers and that offers available now were likely to be among the most competitive available this year.

"We think that by the end of the year rates could go up to around 5.5%. There can be no guarantees, but anyone taking out a fixed deal now is likely to get a good mortgage and it's a convenient way to know what you are budgeting for."

Britain's largest building society, Nationwide, confirmed that fixed rate deals were proving popular, but spokeswoman Jennifer Stoddart said more people needed to take advice before they bought. "There can appear to be some great fixed deals out there, but too many people just look at the headline rate and ignore the fees and charges."

A main catalyst for interest rate rises are house prices - despite speculation throughout 2001 that they would level off, they have in fact continued to spiral.

Halifax recently announced that house prices had increased by an average 15.5% last year. The MPC is likely to want to control demand to prevent a collapse in the market.

The MPC will also be looking at recent consumer spending. Many people are dreading opening their credit card bills following the Christmas spending boom, and higher interest rates would lead quickly to belt tightening.

Interest rates are currently set at 4%.