Borrowers are being warned to prepare now for a rise in interest rates, with a reported million homeowners never having experienced a Bank rate increase. With news that an upward change in the Bank Rate drawing closer, more than a million mortgage holders have only ever owned a home when rates were falling or frozen at 0.5%.
The exact timing of the first rise in the Bank Rate could not be predicted in advance as that decision would be determined by looking at economic data alone. The last rise in the UK Bank Rate was an increase to 5.75% in July 2007.
Many people with debts, most notably a mortgage, could face extra costs when the Bank rate rises. For many of those with home loans, the rising cost would hit when their current deal expired.
The 0.5% Bank Rate has been at a record low since March 2009, but the cost of mortgages has been falling during that time.
Any rate rise, however, when it does come, is likely to be gradual, the Bank of England has said. Those who have already paid off their mortgage or are paying for a home in cash in full are far less concerned about any rate rise. However, for those who continue to be repaying their mortgages, for some, their finances could be affected once rates begin to rise and their disposable income is adjusted accordingly.
If you are concerned with your debt position or are aware that a potential rate increase will impact upon your financial standing, please do not hesitate to contact us for some confidential advice.
Whereas this article is in relation to home loans for private individuals, Companies may also suffer as a result of the potential rise in rates on any facilities that they are provided with by financial institutions. Again, if you are concerned about any impact that a potential rise will have on your business, please do not hesitate to contact one of our advisors for a free confidential conversation.