The Bank of England has this week made a change to interest rates; the first rise in a record ten years. The last time we saw a rise was in July 2007.
The rate has been increased by 0.25% to 0.5% and it has come as no surprise as it had been expected and predicted by many.
Whilst there is lots of media attention and coverage on this, we should bear in mind that this is a small and overdue increase – and we have been here before, albeit many years ago. An increase in rates indicates that interest rates are getting back to normal.
So, what are the key points to consider?
Many lenders will have already amended their pricing positions but tracker mortgages, discounted mortgages and standard variable rates will be effected. Monthly repayments will therefore increase for people with these types of mortgages.
If you’re on a fixed mortgage, as the name suggests, this is fixed so you won’t be affected immediately. However, when your fixed term comes to an end, your new arrangement is likely to be more expensive. Borrowers who fail to re-mortgage will also be affected as they find themselves on their lenders standard variable rate.
You may get a letter or an email directly from your current provider; but whatever your current arrangements, now could be an ideal time to review your mortgage. Furnley House are independent, giving us access to the entire market. We look beyond one provider or even one panel of mortgage solutions.
Savings and Pensions
Rises in saving rates tend to be a little slower than those to mortgage rates however the rate rise should bring some better news for savers.
If you are unsure how this rise may affect your pension, please get in touch. We offer bespoke and tailored advice so we’ll review your existing arrangements and offer you impartial advice.
Should I be concerned?
Simply put, no. The Bank of England generally increase interest rate because of inflation. The rise in the cost of living has been running above the 2% target for some time and they use a rise in interest rates to try and dampen this.
If you are concerned or would like to discuss or review any aspect of your financial planning following this news, please don’t hesitate to get in touch.
Your home may be repossessed if you do not keep up repayments on your mortgage.
The value of pensions and investments can fall as well as rise, and you could get back less than you invested.