How does the rise in interest rates affect you?
It came as a surprise to many when The Bank of England decided to increase the base rate from 0.2% to 0.5% after over a decade of no rises at all taking place. The rise in interest rates is something that we are all aware of and are constantly being bombarded with stories about. But how much do we really know about them? More importantly, what will the implications of rising interest rates be for you? Read on to find out.
Variable mortgage rates will increase
If you are one of the 9.2 million households in the UK that has a mortgage, you will notice that your monthly mortgage payments will increase. Around half of the properties in the UK are on a standard variable rate or a tracker rate, and it is these households that will be affected most. Luckily, the people who are at such variable rates do tend to be older, and with smaller outstanding mortgage balances to pay back. On average, such households owe £89,000 and will face rises of between £11 and £12 a month, according to UK Finance. This, none the less is an inconvenience!
Fixed rate mortgages could see changes
If you are new to the property market and are only just taking out a mortgage loan, it’s likely that you will be on a fixed interest rate – 94% of new mortgages operate in this way. Such rates have begun to increase, but it’s unlikely that you will see any sort of rise immediately. It is, however, worth noting that once you reach the end of your term, you may find that your monthly payment rates increase. There is also a possibility that you could end up with a cheaper deal as lenders who offer fixed rates tend to be especially competitive.
Savers will benefit from an increased return
Good news if you’re currently putting aside money for a rainy day, the hike in interest rates will mean that you could see your pile getting bigger slightly quicker. According to statistics from The Bank of England, the average easy-access savings account is currently paying 0.14% in annual interest. So, someone with £10,000 worth of savings is earning £14 a year. If the rate rise is fully passed on, they would earn an extra £25 a year, making £39 in total.
However, if you have already found yourself in difficult circumstances due to issues discussed, it is worth taking a no obligation, impartial, free consultation here at Bell & Company. Call us today – 02895217373