Borrowers and Savers - How to Survive the Base Interest Rates Rise

By: MoneyFacts

Just a few short days after the Bank of England’s historic base rate increase to 0.75%, everyone has had time for the news to sink in. Now it is time for both borrowers and savers to take action – but what can be done?

Charlotte Nelson, Finance Expert at Moneyfacts.co.uk, said:

“A base rate rise can either be a blessing or a curse depending on where you stand. Regardless of whether you are a borrower or a saver, there are things you can do now to help either get the most from your savings pot or soften the blow of the rise itself.”

Mortgages

“This latest announcement is likely to have borrowers worried about their monthly repayments rising. However, the important thing is not to panic but instead use the rate rise as a catalyst to sort out your mortgage.”

Find out what deal you are on

“Did you just slide onto your lender’s standard variable rate (SVR), or do you not know how long you have left before your deal ends? Now is the perfect time to find out. If you still have time left on your deal, set a reminder so you don’t fall foul of the SVR.”

If you’re on the SVR, it is time to move

“Sitting on your lender’s SVR could be a costly mistake. In fact, research from Moneyfacts.co.uk shows that if a borrower was on the average SVR of 4.74%, they would be £238.83* a month worse off than if they opted for the average two-year fixed rate. With that in mind, perhaps it is time to switch to a fixed rate deal to buffer from any other future rate rises.”

Don’t forget to compare true cost

“When looking for your new mortgage, ensure you consider all aspects of the deal, including rate, any fees and incentives. This way you will get the most cost-effective deal for you.”

Overpay

“By using the extra you may have saved by switching deals to overpay your mortgage, you could potentially be mortgage free quicker than planned. However, some mortgages have limits on what you can overpay, so check the terms and conditions before you do.”

Savers

“A base rate rise was at the top of savers’ wish list. However, just because the Bank of England has raised rates does not mean savers get to sit back and relax, particularly if the last rate rise in November 2017 is anything to go by. There are actions savers can take now to ensure they get the best deal.”

Time to look at your accounts

“This is a great time to reassess all your savings accounts. Look at not only who they are with but how much you have stashed away, what type of savings account they are and most importantly how much interest they are paying.”

Are they paying less than base rate?

“If they are you are probably not alone, as data from Moneyfacts.co.uk shows 65% of the easy access savings market currently pays less than 0.75%. If this is the case for you, now is the time to switch.”

Consider the type of deal you want

“Although fixed rate accounts do pay higher rates of interest, this is likely to be a time when rates start to rise. So, tying up your cash for a long time without access may mean you miss out on better deals later on. It would be wise to consider a mixture of easy access accounts and short-term fixed rate bonds to benefit from the higher rate of a fixed product, but the movability of an easy access account.”

Check the Best Buys regularly

“Once you have everything planned, check the Moneyfacts.co.uk Best Buys. This is a time of upheaval, so you may want to check them a little more often to see if you can get a better deal.”

* Based on a £200,000 mortgage over a 25-year term on a repayment-only basis

moneyfacts.co.uk is a financial product price comparison site, launched in 2000, which helps consumers compare thousands of financial products, including credit cards, savings, mortgages and many more. Unlike other comparison sites, there is no commercial influence on the way moneyfacts.co.uk ranks products, showing consumers a true picture of the best products based on the criteria they select. The site also provides informative guides and covers the latest consumer finance news, as well as offering a weekly newsletter.

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