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For the first time in a decade, the Bank of England has hinted that there will soon be a rise in interest rates.
Bank of England’s rate-setting committee member Gertjan Vliegh has argued for a rate rise to be put in place in the next few months in a recent speech to the economists in London.
If interest rates were to rise, there would be a rise in householder’s monthly bills, provided they have variable or tracker mortgage. For those on a fixed rate mortgage, although they are protected, their mortgage will rise once the deal comes to an end. If you are on a variable rate there will be a buffer in place to help you to cope with an increase in rates.
The rise in costs will all depend on the terms of the mortgage. The average standard variable rate mortgage at present is 4.6% according to Moneyfacts. Those with a repayment mortgage of £200,000 would pay an extra £28.72 based on a mortgage term of 25 years, if rates rose by 0.25%.
With a rate rise possibly imminent, now could be the time to remortgage onto a fixed deal or take out a fixed rate mortgage if you’re about to buy a property.
For savers, this is great news. The average saving account pays just 0.4% interest, down from 1% five years ago. We have had years of rock bottom rates, with a £20bn fall in the amount invested in the last 12 months alone. However, the expectation is that many banks will want to be seen to be passing on the full rate rise to savers.
If you would like advice on how any rate changes could affect you, contact Derngate Wealth today.
Your home may be repossessed if you do not keep up repayments on your mortgage