| The Bank of England has already made four | | | | time when disposable incomes are falling and |
| quarter-point interest-rate rises since | | | | the saving rate has been squeezed to its |
| August 2006, leaving many homeowners hoping | | | | lowest in nearly 50 years. |
| that fears of further rises this year would | | | | |
| prove unfounded. After all, last month the | | | | Nor are those on fixed rate deals necessarily |
| nine-member Monetary Policy Committee (MPC) | | | | protected from the impact of the 5.75% |
| voted by a small majority to freeze interest | | | | interest rate. If you, like many hundreds of |
| rates at 5.5%. This week, however, the more | | | | thousands of others in the UK, secured a |
| monetarily aggressive members of the | | | | two-year fixed rate mortgage in the summer of |
| Committee pushed the vote the other way, with | | | | 2005, taking advantage of the then low |
| interest rates now rising to an eye-watering | | | | interest rates, you may now be facing the |
| 5.75%. Even worse, many business analysts are | | | | shock of dramatic payment increases, as your |
| predicting a further rise to 6% before the | | | | fixed rate comes to an end and you are forced |
| end of 2007. | | | | onto your lender's standard variable rate |
| | | | (SVR). |
| For the average homeowner with, say, a | | | | |
| £100,000 mortgage, each quarter-point rise | | | | So is this all a tale of doom and gloom? |
| in interest rates equates to an additional | | | | Well, it's certainly an uneasy time for |
| £16 a month, on average. That means that, | | | | first-time buyers and existing homeowners but |
| over the past year, borrowers had already | | | | there are still plenty of options in the |
| seen mortgage payments rise by around £64; | | | | market to ensure you get the best possible |
| with this latest rise, total payment | | | | mortgage deal, despite the uncertainties. The |
| increases will be nearing the £100 mark. | | | | most important thing is that you understand |
| And for those with larger mortgages, the | | | | where the market is and where it is heading, |
| financial impact may be far worse. | | | | and that you have contingency plans for |
| | | | possible interest-rate rises in the future. |
| The last time we faced such interest rates | | | | If you are a first-time buyer or you are |
| was in 2001, but the difference today is that | | | | looking to change mortgage, be sure to get |
| our debts are generally far higher. Consumer | | | | the right advice to ensure you do not |
| spend has become the mainstay of the British | | | | over-commit your finances. Using a |
| economy, to the detriment of the | | | | comprehensive search service such as could |
| manufacturing industry, which has instead | | | | also help you quickly and efficiently |
| withered. The process has worked because we | | | | research available deals in the market, |
| buy homes at cheap interest rates, then gear | | | | ensuring that you get the right mortgage for |
| up against those homes to carry on spending. | | | | your individual circumstances. |
| The result is that the country is now running | | | | |
| on the highest level of debt ever. | | | | Most of all, do not let any concerns you |
| | | | might have over possible future interest-rate |
| In particular, favourable interest rates in | | | | rises force you into making hasty decisions |
| recent years have encouraged many thousands | | | | or panic buys. Take the time to think through |
| of people to take out second mortgages, | | | | your options and balance up not only your |
| perhaps to reduce unsecured debt, pay for | | | | finances with the mortgage deals on offer, |
| home improvements or help with the costs of | | | | but also consider carefully your lifestyle |
| looking after a family. If you are one of the | | | | preferences and what financial security you |
| many with a second mortgage, this latest Bank | | | | need to live comfortably and stress-free. |
| of England interest-rate rise will be doubly | | | | Take time out now to consider the market |
| painful. In addition, if you are looking for | | | | challenges and opportunities, and you will |
| new mortgage deals, you might face paying out | | | | reap the rewards in future of both financial |
| as much as two interest points higher, at a | | | | and personal well-being. |