So, interest rates haven’t budged. That’ll be a big relief to many homeowners across the country, who have seen rate rise after rate rise in the last year or so. And with all the fuss about Northern Rock and a supposed drop in confidence in our banks, another rate rise could have been the straw to break the camel’s proverbial back.
But just because the Bank of England has held fast and done nothing, doesn’t mean you should follow suit. Interest rates have held firm at 5.75% but lenders are offering deals well below that and there’s always the risk that rates will continue to rise.
The question is, does this affect you? The chances are if you own your own home with a mortgage you’ll already have felt the strain on your finances. And if you’ve got savings no doubt you’ll be rubbing your hands and waiting for more of the same. Below MoneyExpert will take you through what to do, if anything.
I’m a homeowner
A base rate of 5.75 per cent means average standard mortgage rates are on the rise too. Even homeowners with fixed rate deals will be wondering how they’ll cope with the extra expense once their deal expires, so the decision by the Bank of England really does affect us all.
People on a variable rate mortgage will have seen the cost of their mortgage repayments increase by around £130 a month in the last year or so, and those coming off fixed rates soon will be in for a shock – 2.5 or 3 per cent deals have been replaced by 5 or even 6 per cent average rates.
The monthly cost of a £150,000 repayment mortgage at 3.75 per cent would have been only £779 per month. Homeowners coming off similar deals onto rates of around 6.25 per cent will see their monthly costs rise to around £1001 per month – they’ll have to find over £220 a month or £2,640 a year from somewhere.
If you’re thinking of remortgaging or if you’re shopping around for a cheap deal for when your mortgage expires, click here to compare the best rates and to find the mortgage that best suits your needs.
I’m a saver
Savers are exultant at the current levels of interest rates. If you’re one of them, the chances are you’ve got one eye on yet more rate rises so your money can work even harder for you than it already is.
But if you’ve got savings, you need to ensure your money is in the right place. Many current accounts pay a paltry 0.1 per cent interest on credit and First Direct has even scrapped interest completely on its current account. So don’t just hoard cash and expect it to increase in value.
The best place to look is a savings account, where rates are already on the way up, with many customers benefiting from anything from 6 per cent to 12 per cent, depending on what kind of deal you want.
The best rates are often only available to current customers as banks try to reward loyalty and prevent customers from switching. Abbey for example offer a tasty 10 per cent to existing customers who want to save regularly for a year – and Alliance & Leicester, Barclays and Halifax all have similar deals available to regular savers who are existing customers.
So the first thing to do is check with your bank to see if you qualify for a top rate. If you want to search around and compare the market, click here and we’ll help you choose the right savings account for you.