UK interest rates are anticipated to rise from 0.25% to 0.50% from November 2017. Arguably, this increase is not much of a significance. However, rising interest rates may suggest further increases to the base bank interest rate over the upcoming months/years.
Nonetheless, an increase in the UK interest rate will increase the appeal of saving. In contrast, borrowers or those who are in credit will encounter interest hikes, which will make the attainment of credit more expensive. Hence the need to review how higher UK interest rates could impact mortgages, credit cards, loans and savings accounts.
If we make the assumption that the UK base interest rate is set to rise, the following is worth acknowledgement:
- Monthly mortgage payments will become more expensive for those with non-fixed interest rate deals
- Interest rates for new mortgages will increase; which adds further costs for aspiring homeowners
- If you’re on a variable rate mortgage, switch and secure a fixed-rate mortgage before any interest rate increase occurs. This provides a degree of certainty over an agreed time period and will make budgeting monthly payments easier. However, interest rates can fall/increase/remain the same. Only time will tell.
- Existing saving accounts that are linked to the base bank rate will encounter an increase. You’ll get more returns for your savings this way.
- New saving accounts provided by the banks will be offered at a higher rate of interest; providing savers more incentive to save money.
- New credit cards will be offered at higher rates of interest. This makes credit more expensive and stresses the importance of making full payments each month for any outstanding credit due. Avoid minimum payments if you can to avoid incurring interest payments altogether.
- For existing loans, the interest-rate would have been agreed/fixed at the beginning of the term. Any change in interest rate will not affect existing and fixed personal loans. In contrast, new personal loans will be more expensive due to higher rates of interest driven by the expected rise in the UK base interest rate.
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