On August 4th, the Bank of England Monetary Policy Committee voted to increase the Bank of England base rate from 1.25 per cent to 1.75 per cent, in a bid to help prevent inflation from spiralling out of control.
Interest rates have a big impact on different areas of life, including mortgages, pensions, savings and other borrowing. Any changes in the base rate can influence the cost of borrowing, as well as interest rate charges from banks and other financial institutions.
Whether or not your mortgage repayments will be affected by any interest rate changes will depend on the kind of mortgage you have and when the deal you’re currently on comes to an end.
For example, if you’re on a variable rate tracker mortgage, this means it’s linked to the Bank of England Base rate, so it’s likely that your repayments will be affected immediately if interest rates do rise.
People on fixed rate mortgages, meanwhile, are likely to feel the effects of interest rate rises once they come to the end of their current deal. They may also find that remortgaging becomes more expensive, in line with rises in interest rates.
According to the Guardian, fixed rate mortgages have become the most popular option over the last few years, predominantly because rates have become so competitive but also to afford them greater protection from rising interest rates.
Of these products, two and five-year deals have traditionally been the most popular, but a rise in demand is also now being seen for ten-year fixed rate mortgages.
Once you know what kind of mortgage you’re on, you can work out how the new change will impact your finances. If you find that your repayments are likely to increase, come up with a realistic budget and see if there are any areas in your life where you could afford to cut back a little.
Ultimately, for mortgage holders, a rise in interest rates could put finances under pressure. Coupled with the cost of living crisis driving up energy and grocery bills, mortgage repayments could increase, as well.
Of course, it’s natural to be concerned about your finances, especially in the face of surmounting pressure – and, as such, it can be useful to get in touch with a professional debt adviser before you’re even in debt, so you can stay on top of the situation… and have support in place if and when you do find yourself debt.
Are you looking for IVA mortgage brokers? Get in touch with our friendly team today to find out more.
Your home may be repossessed if you do not keep up with your mortgage repayments.
There may be a fee for mortgage advice. The actual amount you pay will depend on your circumstances. The fee is up to 1% but a typical fee is £595.
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Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it. There may be a fee for mortgage advice. The actual amount you pay will depend on your circumstances. The fee is up to 1% but a typical fee is £595.
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