The Bank of England (BofE) base interest rate has increased from 0.5% to 0.75%. This is important as it can change the amount of interest we pay on our mortgages. It can also increase the interest we receive on savings accounts.
This makes it a really good time to review your finances.
If you’re on a fixed-term mortgage, your payments will remain the same. However, if you’re on a standard variable rate or a tracker rate mortgage, your monthly payments are likely to increase.
Our research shows mortgage shoppers are increasingly looking for fixed-term deals to protect themselves from any rate rises. If you’re currently on a variable or tracker mortgage there are things you can do:
- Compare mortgage products to find the best deal for you and speak to a mortgage broker for more information
- Check your credit score before you apply for a new mortgage and allow plenty of time to manage and improve it. This could save you money and improve your chances of getting the best deals.
- Review your spending and make sure you’re planning ahead for both immediate and future interest rises
Savings rates could now climb so don’t be afraid to shop around. Use comparison tools to check you’re on the best savings rate and make your money work as hard as possible.
The Bank of England reviews the base rate on a monthly basis, so do check back in to find out how it might affect you going forward.
Loans and credit cards
If you have a personal loan, it won’t usually be affected by an interest rate change. That’s because you agreed to a fixed rate of interest when you took out the loan.
It’s possible for the interest rate on your credit card to rise, although they don’t tend to follow changes in the BofE base rate. However, you will be given notice before this happens, subject to the terms and conditions of your account. You'll have the choice to cancel the credit card and repay the outstanding balance within 60 days. Any interest added during this time should be charged at the lower rate.
If you are paying credit card interest, you may want to think about transferring the debt to a 0% balance transfer card. You can get more information here.