The Bank of England Base Rate remains at 0.5% – its lowest level since the Bank was established in 1694.*
With commentators adjusting their predictions of a Bank of England Base Rate rise on an almost monthly basis, you may feel unable to make a confident decision about your mortgage. But there are measures you can take to prepare for an interest rate increase.
Take control of your finances
The first step is the most important: consider how an increase could affect you. You may be in a fortunate position, where even an increase of several per cent would not impact your standard of living. However, this is unlikely to be the case for most people.
Research from the Money Advice Service suggests more than half of UK homeowners are not prepared for a rise.**
The research also reveals that three out of four homeowners haven’t considered how a 3% interest rate increase would affect their mortgage repayments. This is despite the Bank of England Governor Mark Carney estimating interest rates will rise by 2–3% over the next three years.
Review your mortgage
If you think an increase in your mortgage repayments could have a negative impact on your financial wellbeing, you should consider reviewing your mortgage arrangements. We can help you choose a deal that’s right for your needs.
If you want to protect yourself against future interest rate rises, you may want to consider a fixed-rate mortgage.
This means your payments are set at a certain level for an agreed period, regardless of whether your lender changes its Standard Variable Rate (SVR). Such an increase typically occurs when the Bank of England Base Rate starts to climb.
A fixed-rate mortgage makes budgeting easier because your payments will stay the same, although it also means you won’t benefit if the SVR then goes back down.
Check your bank statement
You may find it useful to take a closer look at your overall finances, and consider if and where you can make savings to prepare for higher repayments, should they materialise.
Looking at your bank statement in detail can help you decide if you need to make cutbacks on your spending. You may be able to easily identify areas where you could make significant monthly savings.
Don’t leave it too late
Don’t be tempted to wait until rates start increasing. Consider your options now. Acting decisively could pay dividends in the future – even if rates remain static.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
For this service a fee of £395 is payable upon agreement to use our services
*Bank of England Base rate of 0.5% correct on 30 November 2014
**The Money Advice Service: More than half of UK homeowners not prepared for interest rate rises: 8 October 2014 https://blog.moneyadviceservice.org.uk/more-than-half-of-uk-homeowners-not-prepared-for-interest-rate-rises