Mortgage rates have been at an all time low since 2009. Mark Carney, head of The Bank of England has now hinted that a rise in the base rate for mortgagaes across England was “drawing closer”.
If this is true, interest rates could be on the rise from as early as December increasing from 0.5% to around 2.0%. For homeowners, this could mean a mortgage of 90pc LTV (loan-to-value) could face an increase in monthly outgoings by as much as £500 by 2018.
This recent outburst has sent homeowners into a remortgaging frenzy, with remortgaging rates at an all time high since 2013. Statistics show a 30% rise in the number of homeowners remortgaging their properties since June this year, desperate to beat the rising rates.
Although the increase in interest rates is not set to take an immediate turn, homeowners must begin to prepare themselves for the steady climb of rates over the next three years.
Should you find yourself in a position where remortgaging is not accessible or appropriate, there are some still some measures you can take to save yourself from the shock of rising rates later on. One option is to overpay into your mortgage which will reduce your outstanding balance more quickly and have the added benefit of lowering your overall interest rate. Alternatively, you could look to make changes to your household spending to ensure that the rising rates can be accommodated for.
Homeowners having entered the market within the last 7 years will for the first time be experiencing the increase in interest rates and this is no doubt an extremely daunting thought.
Bev Budsworth, MD of The Debt Advisor comments: “There are hundreds of thousands of homeowners whose incomes have seen little increase over the years meaning that many rely on credit to an extent. Many of these homeowners will struggle when interest rates start to rise. For these people, it may not be that easy to switch to fixed rate products due to affordability and debt issues”.
Bev adds, “Clearing your debt whilst interest rates remain low is a priority. The Debt Advisor have a handy debt calculator which will help you work out a budget, identify debt levels and work out what surplus funds you might have to clear your debt. If it appears that it is likely to take more than 5 years to clear your debts using your monthly surplus, it’s a good idea to seek help.”
If you would like to find out more about the range of debt solutions that are available to you, call us today on 0800 0851 825 or use our contact form. Our advisors can speak with you about all available debt solutions such as Debt Management, IVAs, Bankruptcy and debt consolidation.