Nearly HALF of mortgage holders have never seen a rate rise – but that could change NEXT WEEK
IF the Bank of England does put up interest rates as anticipated, then homeowners may be forced to make their monthly budget stretch even further.
A 0.25 per cent increase in interest rates could cause some borrowers to see a rise in their payments for the first time - and it could come as early as next week.
Interest rate hikes could mean that one in 20 variable rate mortgage holders will struggle to make ends meet, according to consumer website Which?.
We've had record-low rates for so long because of the state of the economy after the financial crash in 2008, and they were slashed again to 0.25 per cent following the uncertainty after the EU referendum.
It is now expected to rise to 0.5 per cent following an announcement from the Bank of England on November 2 - which would be the first of its kind for over a decade.
Which means that according to the survey by Which?, just under half of mortgage holders - 42 per cent - have never experienced such a rise.
So how many homeowners are prepared for it?
Who will it affect?
Those who have taken out tracker or variable rate mortgages will be hit by the potential interest hike, which is likely to immediately affect their monthly payments.
If you're on a fixed term rate then the rise won't change your locked in payments until you come up to renew it.
Interest rates on standard variable rate mortgages follow the base rate set by the Bank of England, so they can change without the control of the borrower.
Low base rates are bad if you're a saver but great if you're a borrower.
So if the base rate is set low then your mortgage repayments will also be low. But a rise will also be reflected in your monthly repayments.
How will it affect me?
As the rise in November is likely to be of 0.25 per cent this could add over £500 more a year for a homeowner with a £350,000 mortgage.
"When swapping to a fixed deal even with the same lender, you probably will have to go through an application process to check affordability etc.
"It's still worth doing though. It may be a couple of hours of your time but if it saves you £15 to £50 every month for the next few years, then it's time well spent."
It's a bit more difficult to swap tracker mortgages where you may have got a discount on the variable rate and you may be tied in for a certain period of time. If in doubt, check with your lender.
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If switching isn't an option for you at the moment then money expert Harry Rose from Which? advises that you need to be prepared.
He said: "It’s important that preparation to deal with the impact of a hike starts now. Planning ahead with an effective budget is one simple way to stay on top of your finances."
Will this be the first of many rate rises?
No one knows. Governor Mark Carney has been eager to point out that any rate rise will happen gradually and be limited.
If rates do rise in November then it will be first time in 10 years.
Millions of households will notice that their monthly budgets might not stretch as far as they used to.
If inflation continues to rise and rates return to something like their historic levels, both borrowers and homeowners could see their finances stretched even further in years to come.
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