05 January 2015

How an interest rate rise could affect you

The current Bank of England base rate is 0.5% and has been for some time. However, governor Mark Carney has suggested that, at some point, rates will have to rise. While that’s good news for savers, is there anything home owners should consider?

Refresh your household budget

More than half of UK homeowners say they wouldn't be prepared if their mortgage payments were to increase, according to October 2014 research from the Money Advice Service. With 47% of people polled saying they'd struggle to cover an increase of up to £150 a month, there may be steps you can take to be more equipped for a rate change.

Start with simple steps like calculating your income and essential outgoings, and work out if you have any money left over at the end of the month - there may be areas where you can reduce your spending. Could you cut back on things like groceries and utilities, or bigger things like travel and leisure? For example, could you walk more or prepare more of your meals at home?

Put a bit away into a savings account

Get into the habit of saving any money you can at the end of the month, and if you can, try to build up an emergency fund to help get you through difficult times. 
If the base rate does rise, savings rates are likely to as well - so keep an eye out for the best variable rate accounts and cash ISAs and check you have the freedom to move your money if you need to.

Check mortgage calculators

You could try and approximate how an interest rate rise could affect your mortgage.
You can either speak to your lender or if your mortgage is with Nationwide our mortgage calculator could help you calculate how much your repayments may go up by. 

If you’re not a home owner already or want to move home, there are a number of schemes that could help you. Nationwide offers a Save to Buy scheme designed for first-time buyers and home-movers if you’d like to take a look.

Consider switching to a new mortgage

It might be an idea to look into getting a new mortgage deal to see if you can make the most of the existing low base rate. If the value of your home has increased since you took out your original mortgage, your loan-to-value (LTV) ratio may have also increased. This may mean you have more options in the mortgage market if you shop around, while existing Nationwide mortgage customers may also have the option to switch deals.


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