Interest Rate Rise

London

Interest Rate Rise

In 2007 Bulgaria and Romania joined the European Union, Lewis Hamilton got his first drive in Formula 1 partnering with Fernando Alonso at McLaren, the final book in the Harry Potter series was published and England played their first match at the new Wembley Stadium.

It was also the year in which the Bank of England last raised interest rates, when they went up by 0.25%.

That all changed on 2 November 2017 when The Bank of England voted to raise UK interest rates for the first time in over a decade, to 0.5%.

So how could an interest rate rise of 0.25% affect you?
In the short term, both borrowers and savers could see a modest effect on finances. Savers are likely to be pleased with the welcome boost even if the increase is small. Borrowers however will be less pleased as they could see their mortgage repayments rise.

Impact on borrowers
Higher interest will mean that those on Standard Variable Rates (SVR) or Trackers Rates will see their mortgage repayments rise. On a mortgage of £125,000 an increase of 0.25% would result in payments increasing by £15 a month (£185 a year).

Those with larger mortgages will in turn see a larger payment increase. Those with a mortgage balance of £250,000 will see their monthly payments increased by £31 (£369 a year). However, the 57% of borrowers on a fixed rate deal will be unaffected during their fixed term.

These figures might not seem much in isolation, but borrowers should also be aware that higher interest rates could impact other borrowing, like credit cards, car credit or unsecured loans.

There’s also the prospect that rates could continue to rise over the long-term. If we hit 1%, the monthly repayments on a £125,000 mortgage would go up by £78.48, and £161.69 if the rate doubled to 2%.

If you’re concerned about the impact of higher interest rates on your mortgage repayments you may want to consider a fixed-rate deal, especially if you’re currently on SVR. Remember, if you’re already on a fixed-rate deal you may face higher repayments when the term ends. Make sure you diarise when that’s due to happen and get in touch so that we can discuss whether the best option is to remortgage.

Impact on savers
According to research there’s no standard savings account on the market that can outpace inflation, in fact the average easy-access savings account is currently paying 0.35% interest.

If the Bank of England increases the base rate savers may be able to find better returns to keep up with rising inflation. However, as with mortgages, those already on a fixed rate will not see higher rates until the term ends.

Whether you’re a saver or a borrower, we’d love to help you make more of your money. Get in touch to find out how.

Your home may be repossessed if you do not keep up repayments on your mortgage.

How to choose a good conveyancer

Conveyancing is an important part of the home buying process, and it’s important to note it’s required when both buying and selling a property.

So what should you consider when choosing a property solicitor to carry out your conveyancing? It’s important to use a qualified property solicitor who’ll be able to take care of a range of issues on your behalf, including:

  • Dealing with the land registry
  • Carrying out searches
  • Managing Stamp Duty
  • Collecting and transferring funds

Cheapest isn’t necessarily best

Solicitors charge for their time in different ways. Whilst some may offer a fixed fee, others will charge a percentage of the value of the property, so shopping around is a key factor to consider. Additional costs such as postage and VAT may be treated as disbursements, and therefore they’ll be added to any original quote, so you should clarify how this is handled when you first enquire. If a solicitor has been recommended by a family member or friend who’s used them before, this can be a good indicator of a good service.

Online or DIY conveyancing?

There’s been a rise in recent years of online-only conveyancers who offer you the chance to track the progress of your case online at a time that suits you. You can also choose to do conveyancing yourself, and this can help keep costs down. However, you should proceed with caution because if any searches and other formal legal procedures are not done properly, or not completed at all, this can cause major problems. If you use a professional conveyancer, you may be covered by their insurance for some of the things that could go wrong.

You should make sure that the solicitor or firm you choose takes the time to explain everything to you, and that they’re available to answer any questions you might have about the process.

Your property may be repossessed if you do not keep up repayments on your mortgage