UK Interest Rates Are Rising – What Does This Mean for Mortgage Holders and Savers?
Bank of England’s Mark Carney has all but announced the lift in interest rates in his recent press conference leaving many homeowners wondering what might happen next.The impact of Brexit is hard to ignore. With de-globalisation affecting rising interest rates, and stagnated wages in the UK, people are sure to notice this interest rate increase.
This is the first rise in borrowing costs for a decade. And it will mean higher monthly bills for a great quantity of mortgage holders across the UK. So how much more should we expect to pay? A question on everyone’s mind at the moment. Of course the figure will change with each household and the type of mortgage that you have, a representative case being, someone with a 25-year £250,000 repayment tracker mortgage paying 2 per cent interest could see their monthly £1,100 repayment rise by as much as £30. However, those with a fixed rate mortgage – the majority of new loans, won’t feel the impact of the rates hike until they come to remortgage.
Will this have a great effect on us? For those who truly have over-extended they could find themselves unable to reach these new demands. ‘Post-crash’ commercial banks though, have been under extreme pressure to lend to people who can withstand modest rises. However, though most families can withstand this increase in repayment costs there could be other downsides. Having to pay back more in repayment costs could lead to families spending less generally. Less disposable income due to higher repayments mean less spending in shops, which further contribute to the slowed economy.
Interest rates have been at a record low over the past few years. Savings accounts and ISA’s have had very poor rates of interest, taking away the incentive to save. Now though, with some movement in interest rates, savers can expect to get a little bit more from the Banks for their money.
It is possible that banks may try and prevent the interest rate hike from reaching those who save with them. If only to protect their profits. However, this would undoubtably result in public backlash. After years of poor interest, it’s about time those who have squirreled away and saved are rewarded.