How to get set for interest rate rises
A watched pot never boils, they say.
When you’ve been watching interest rates remain relatively static over recent months, it's tempting to think they're never going to bubble up.
But rate rises are now here, which for many of us will mean facing the prospect of paying more for our mortgages.
Consumers need to address what that means for them and what they can do, says mortgage adviser Laura Almond from Nottingham Mortgage Services (NMS) - a subsidiary of The Nottingham.
"We've had a massive period where rates have been very low and benign - and people have been right to take advantage of that and enjoy it" says Laura. "Now rates are going to increase, we are prompting people to question whether they can maintain their lifestyle as rates rise, or does something need to give? Is there a better mortgage deal? Is there a product that can give more security in terms of monthly repayments? People need to understand all this and stay in control."
Here are Laura's top tips on what to do about the rate rise:
Get reacquainted with your mortgage
Many of us won't have paid much attention to our mortgages in recent years. Interest rates haven't altered very frequently, our unchanging monthly repayments were direct-debited, and that was that. Those days have come to an end. Now the Bank of England (BoE) has raised the interest base rate, you need to understand how that might impact on your mortgage. "If you have any doubts about what kind of product you're on, you should contact your lender," advises Laura.
Consider whether your current mortgage is right for you
Check your finances
Look at your incomings and outgoings. How much spare cash do you have at the end of every month? Online budget planners can help you with this. Calculate how much different rate rises might add to your monthly mortgage repayments. Think about how you would manage if your mortgage costs increased by £30, £50 or £100 a month. Would you be able to afford them?
Consider cutting back your spending now
If you're already on a tight budget, look at where you can save money now before interest rate rises begin to bite. Do you really need satellite TV? Is your golf club or gym membership an essential? Consider getting advice from a money information or debt advice agency. They might be able help. Don't wait until you're in difficulties before doing something.
Lots of us will have standard variable rate (SVR) mortgages - in some cases because we were automatically transferred on to them when our fixed rate or discount deals ended. SVRs are attractive while interest rates remain low and stable. When rates begin to climb they can bring uncertainty to our finances. If the BoE raises rates (by 0.25% or 0.5%, for example) it does not automatically follow that your lender will do likewise. Some lenders may choose not to pass on a rise to their SVR customers - at least in the short term. Others may increase their rates more than the BoE. Variable rate mortgages will still be the best option for lots of customers. Others may need or want the security of a fixed rate mortgage which will keep their repayments at a set level, for a set period of time, regardless of the BoE base rate.
Have a conversation with a mortgage adviser
Talk to a mortgage adviser sooner rather than later. "Find out what options are open to you," says Laura. "You might be able to move to another product offering more security of payments - a fixed rate mortgage, for example. You might be able to extend the term of your mortgage to reduce your monthly repayments."
Don't be afraid to switch
If your current lender can't offer you a competitive mortgage deal that meets your needs then look elsewhere. Whole of market mortgage comparison from NMS has impartial advisers who can search thousands of different products to find the deals that best match each customer's circumstances and requirements.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGES