Anyone on a variable rate or tracker rate will be making higher monthly payments for their debt. It is estimated that this affects around 40% of homeowners amounting to around 3.7 million borrowers in total. This is a high percentage of people who are looking at their regular payments going up, and therefore having less money left to spend.
This will inevitably impact on landlords if they have a portfolio with tracker rate mortgages in place.
Anyone on a fixed rate will continue their monthly payments until their fixed rate expires, at which point they will most certainly end up paying more.
Cost of living increase
The rise in rates coupled with wages not having risen in line with the increase in the cost of living may well be compounded by a Brexit deal that means increased costs for essentials such as food and medicine meaning households face a bleak few years ahead.
Banks can often be slow to pass on higher interest rates on savings accounts, so the effects won’t be immediate.
The interest rate rise will mean that savers gain a little, however a recent survey revealed that a quarter of British adults have no savings, and therefore the increase in interest on savings will impact on those who have been diligent and put aside money for a rainy day.
Anyone taking out a mortgage or considering one should factor in possible rate rises in the future, and stress test their finances ensuring that they’d be able to make payments if a 2 or 3% base rate was to occur.
The interest rate is now the highest is has been for ten years and with the uncertainty of Brexit on the horizon, and inflation currently officially standing at 2.3% the decisions made by key government figures will no doubt impact on us all.
David is an authorised High Court Enforcement Officer and our Director of Corporate Governance