Are you showing enough interest in interest rates?
What do Brits really know about the base rate?
Person 1: To be honest I have no clue what the base rate is, no.
Person 2: I’ve never heard of the base rate.
Person 3: Me neither.
Person 4: Ummmm.
Person 5: Ummm I have no idea what the base rate is.
Person 6: Yes I do.
Person 7: The base rate is the interest rate set by the bank of England.
Why should we even care about the base rate?
The amount that you pay on your mortgage will be linked directly or indirectly to the bank of England base rate. The bank of England base rate has been at an extremely low level and has been unchanged for a long period of time. However, it will go up at some point in the future and when it does, you can expect the cost of your mortgage to rise.
Person 8: If base rates went up what could we afford. Well we are actually quite tight at the moment, I don’t think we could afford much.
Person 7: If it was another 0.25%, I don’t think it would give me too much trouble.
Person 4: I can afford another £100 to £120, at most.
Person 6: If it did go up quite substantially it could be quite a bit of a squeeze for me.
So what can do to prepare for a base rate rise?
The first thing you should do is to look at your mortgage statement. You should make sure you understand the amount you have borrowed, the rate you are paying, details about your mortgage and specifically what could make that rate change
Person 9: Uh the rate of interest I pay my mortgage is 3.89.
Person 10: Probably about 3 and half percent.
Person 11: The rate I currently pay on my mortgage is 1.7.
Person 7: One point nine percent.
The second thing you should do is that you should test how easy it would be for your mortgage to go up. For every hundred thousand pounds you have borrowed, think about an increase of one hundred pounds a month. There are a number of things you can do. You can look to save more now. You can look to spend less now or in the future, or you look about how you could change your mortgage maybe, to give you certainty for longer.
Person 11: The mortgage I have is fixed rate mortgage.
Person 6: Its base rate tracker so when the rates do up, it will go up.
Person 10: It’s a floating rate interest mortgage.
Person 9: I have a fixed repayment mortgage
Whatever you do, make sure you make an active decision and if you need help in relation to your mortgage, then pick up the phone and ask to speak to a mortgage advisor.
So there you have it, no one knows exactly when a base rate rise will happen, but being aware of your financial situation today can help you plan for tomorrow.