But, donÂ’t panic just yet. There are things you can do to make sure you donÂ’t end up in financial trouble because of interest rate rises.
Out of all the debts you have, your mortgage is probably the biggest, and this is probably the one that dominates your monthly outgoings.
Find a new mortgage deal.
A rise to 5 per cent would mean around a 40 per cent increase in UK variable rate mortgage payments.
Just a 0.25 per cent rise in the base rate will mean a £100,000 mortgage will cost you £250 a year more if you’re on a standard variable rate.
Use our calculator to work out how much your mortgage payments will be.
Darren Cook, Head of Mortgage research at moneyfacts.co.uk, said: “While the cost of fixed rate mortgages has continued to creep upwards, those consumers on discounted rates should not assume that as bank base rate has remained unchanged, that their rates will also remain static.
“If we take an average mortgage of £150k over 25 years, on an interest only structure a 0.25 per cent rate increase would cost the consumer an additional £31 per month, a hefty dent in your disposable income.”
However, there is a way to limit the damage that a rate increase could do. See if you can move to either a fixed rate or discounted rate mortgage deal, especially if youÂ’re on a standard variable rate. Fixed rates for two-three years usually offer the best rates.
Although, if youÂ’re confident that the base rate isnÂ’t going to rise much further, you should see what discounted rates are available.
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Cook said: “While lower rates can currently be found on discounted mortgages, it is worth remembering that to some extent you are at the hands of the lender as to whether this rate fluctuates.”
