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With interest rates rising for the first time in over 10 years last November, and experts predicting there could be two more increases this year, will you be able to cope?
If your finances are already under pressure, could interest rate rises push you to breaking point? Well, now’s the time to make sure you’re fully prepared.
What happens after an interest rate rise?
The good news is that when the Bank of England increases its base rate, it doesn’t automatically mean your repayments will go up. So let's have a look at what's likely to be impacted, and how you can plan ahead to be prepared.
Got a mortgage?
If you’ve got a mortgage, the key point is whether you have a fixed rate mortgage, or a variable rate one. If you aren’t sure, check with your lender.
If your mortgage rate is fixed then, by definition, it won’t increase if rates rise. If it is a variable rate product then it most likely will – whether it’s a tracker or a standard variable rate. If you are on a variable rate product, there's still time to switch to a fixed rate. Speak to your mortgage lender, or a reputable mortgage advisor.
An interest rate rise won’t have any direct impact on your rent. It’s worth bearing in mind that, if you rent privately, your landlord’s mortgage cost might increase, though. This could feed through into your rent next time your tenancy renews.
If you’ve got existing personal loans, generally the interest rate on these is fixed when you take them out, so your repayments shouldn’t change. Check your paperwork, or with your lender, to confirm.
Credit cards, store cards and overdrafts
These usually have variable interest rates, butut they're not usually directly linked to bank base rates. So there is no guarantee they'll increase when the base rate does.
The interest rates on this type of product are already high and are unlikely to change in the event of small base rate changes.
Could a debt solution help you?
If you're already struggling with your repayments, or cutting back on essentials like food and heating to try to stay on top of them, then it could be time to get professional advice on how to get your finances back under control.
It may be that better budgeting is all you need, but a Debt Advisor will also be able to assess whether a debt solution is a suitable way for you to get your finances back on track.
Starting a debt solution now could give you peace of mind because you'll know you're dealing with your debts, whatever happens to interest rates this year.
by Christine WalshBack to blog home