Cash-strapped homeowners have seen a glimmer of hope after US interest rates were cut by larger amounts than was widely expected.
The Federal Reserve – America’s equivalent to the Bank of England – cut interest rates by 0.5 per cent in an effort to stave off concerns of a recession being sparked from the credit crunch seen in the UK.
But the move has been seen by many as a sign that the Bank of England may follow suit and ease the pressure on homeowners by cutting rates here.
Over the past year interest rates in the UK have risen five times to the current rate of 5.75 per cent. That has added well over £100 a month to the typical mortgage repayment – enough to stretch most people’s household budgets considerably.
Between a rock and a hard place
All eyes are on the Bank of England in the run up to its next rate decision in early October. Ever since the run on bank Northern Rock this week the authorities have been urging the Bank to consider cutting rates to revive confidence in the system.
And while the Government may have guaranteed savers’ deposits at Northern Rock, Gordon Brown can hardly start guaranteeing our mortgage repayments, too. Rates are still relatively high in the UK and in the long run they could get higher still.
The monthly cost of a £150,000 repayment mortgage at 3.5 per cent would have been only £758 per month – something many of us will have come to expect in the summer of 2006.
But homeowners coming off deals like that onto rates of around 6 per cent will see their monthly repayments rise to around £977 per month – in other words they’ll have to fork out over £200 a month or £2,400 a year more.
If your mortgage deal is close to expiring or if you’re looking to fix your mortgage rate, click here to compare the best rates and to find the mortgage that best suits your needs.
And don’t forget – if you’re still on a fixed rate deal you can apply for a mortgage now and leave it open for three to six months.
Compare mortgage quotes now
The Northern Rock fiasco may have caused thousands to withdraw savings from the embattled bank, but the bottom line is your money is safe. So if you’re a saver these are good times with rates increasing and savings accounts becoming increasingly competitive.
Banks are bringing in great introductory deals to entice new customers – rates of 8 or even 10 per cent are not out of the question. So if you’re a saver don’t settle for anything less than 5 per cent. If you’re looking for somewhere to stash the cash, click here to compare the best savings deals and to find the right one for you.
Compare savings accounts today