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Ways to Cope with the Interest Rate Rise

  • 7 years ago

Whether you’re one of the 11% of UK mortgaged households on a tracker deal or whether you’re on a fixed-rate mortgage, you’ll must get ready for your payments going up after the Bank of England raised interest rates for the first time in over a decade.

An average of £144 a year more

The average outstanding mortgage in the UK is £89,000, so people on fixed deals will pay around £12 more each month, while people with trackers will pay up to £180 more each year. This rise, although small, needs to be prepared for and absorbed, so here are some ideas for you.

If you’re on a tracker, switch to fixed-rate

Your tracker mortgage means it follows the base rate each month. This is great when rates are low or dropping, but as we can expect at least two more rises after this latest one, a fixed-rate deal is a better option. Find out when you can remortgage and whether it’s worth ending your current deal a month or two early. You may have to pay a fee, but it could work out less than the extra £180 each year.

Make some overpayments

If you have a while to go before you remortgage, then take advantage of the time to knock as much off your principal amount as you can. Even if it’s just £20 extra a month, it’ll help. If you get a decent-sized bonus each year, think about using it. It hurts, but then so does an increased mortgage payment.

Think about how you could make cutbacks

The national average is £12, but you could face a larger monthly increase. If there’s anything you could do without – a TV subscription, for example, then nix it. Grab that latte every other day on the way to work, switch energy providers, buy own brands, whatever it takes to shave a few pounds off your monthly expenditure.

Make sure you’ve got the best deal possible

Talk to your mortgage provider and see what the lowest interest rate possible for you is, then see if you can nudge it even lower. If you can’t do this, then another option is to take out your household insurance with the same provider, as you may get a yearly cashback reward or reduced premiums.

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