The Bank of England (BoE) confirmed that interest rates will rise to 5.75 per cent on Thursday, adding an extra £16 a month on an average £100,000 repayment mortgage and £23 per month to a £150,000 home loan.
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And many experts are predicting more increases before the end of the year, but heres what you can do to protect yourself.
If you’re paying your lender’s Standard Variable Rate (SVR), switch!
If your mortgage deal has run out, you will no doubt be currently paying your lender’s SVR.
As one of the most expensive ways to borrow, you must start looking for a cheap deal immediately and remortgage!
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If you don’t like surprises, fix.
The most obvious solution to avoid the pressure of rising interest rates is to opt for a fixed rate mortgage. This way, youll know how much youll be paying for a set amount of time and be shielded from any future increases.
And with many industry experts hinting and more rate rises this year, fixing your mortgage is a very sensible idea. Although, if predictions are wrong and rates fall you wont benefit.
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If you have Savings, try offsetting your mortgage
With rising inflation, it can be almost impossible for taxpayers to make money on a variable rate savings account, especially if they pay higher rate tax.
Rather than keeping your cash in a savings account (which is taxable), by linking it to your mortgage the cash can work to reduce your debt. As most modern mortgages calculate interest on a daily basis, every pound will work to reduce the interest payable on your largest debt, no matter how short a period of time it is in there.
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And whilst the money is used to reduce your mortgage debt during the time it is in the account, it can still be withdrawn at any point — just like traditional savings.
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