Practical tips to help you improve your credit rating and avoid expensive high interest loans
For only the second time in the last 10 years, the Bank of England has raised the interest rate. Increasing from 0.5% to 0.75% – the highest level since March 2009, this was a decision that has impacted many people.
Whilst the estimated 3.5 million people with variable or tracker mortgages will see repayments increase, the rise will be welcomed by savers.
If this were to happen how would it affect you?
If you are on a longer-term fixed rate mortgage your payments will remain unchanged. You will, however, need to account for the rise once your fixed term ends.
If you are on a standard variable rate (SVR) mortgage you may actually see no change. Lenders are considered unlikely to increase rates until there has been a more significant increase in the base rate.
If you have a tracker mortgage that follows the base rate you will, of course, inevitably see an increase in your payments. Depending on the size of your loan this could be anything from around £6 on £50,000 and £31 on £250,000 according to figures from the Council of Mortgage Lenders.
Those on interest-only mortgages will see a larger increase in their payments as the whole amount is calculated by interest rates rather than a repayment mortgage where the interest only makes up part of the payment.
For example – On a £150,000 variable mortgage, a rise to 0.75% is likely to increase the annual cost by £224
Interest rates on savings have been poor for many years now but an increase in the base interest rate will put pressure on providers to raise their rates. There has been some improvement recently and we would expect this to continue to the end of the year.
The guys over at the excellent Revolut blog took a closer look into how this may impact savers. For more, please check out their article – ‘What the BoE’s interest rate rise means for you and your money‘
Mark Carney has told us that although the rise in the base rate will be small but is sticking to its guidance that interest rates will continue to head higher, but only at a gradual pace and to a limited extent.
The financial markets have taken this on board and are forecasting one, and perhaps two rises of 0.25% over the next 2 years.
If you are unsure what option would be best for you we recommend you speak to a mortgage advisor who will be able to talk you through all the possibilities.
For more on this, please visit the dedicated area of the BBC website by clicking here.
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