11th August 2015
Homeowners have been cautioned that they have only a “short window” to get their finances in order before interest rates rise.
The warning comes from the Money Advice Trust, following the latest comments from Bank of England governor Mark Carney, who declared last week that higher interest rates were “drawing closer”.
Jane Tully, head of insight and engagement at the Money Advice Trust, the charity that runs National Debtline said: “Signs that interest rates will not rise until next spring give borrowers a little more time – but we should not take false comfort from this news. There remains only a relatively short window for households to prepare for the impact that higher interest rates will have on their finances.”
According to BBC News more than a million homeowners across the UK have only ever experienced interest rates at 0.5%, which have now been stuck at their historic low for more than six years. The last time the Bank of England upped the base rate was in 2007, when the cost of borrowing reached 5.75%.
While many economists and commentators thought a hike could come at the end of the year, the consensus now appears to be forecasting the first hike to come sometime in the first three months of 2016.
But the Money Advice Trust is urging borrowers to take into account now how much their repayments could rise when the cost of borrowing increases.
“Our message to borrowers is clear. Whether you have a mortgage, personal loan or outstanding balances on credit cards – interest rates are going to rise, and it is highly likely you will have extra costs to pay,” added Tully.
Rising interest rates will affect renters too, as many private landlords will pass on their higher mortgage costs to their tenants.
Tully said: “This will add further pressure to household budgets already squeezed by sharp rent increases in the last few years. Households need to look at their finances now, to make sure they can absorb these extra costs. Crucially, now is the time to act if you are worried about your ability to meet your repayments – by seeking free advice a charity-run service such as National Debtline as soon as possible.”