PROTECT AGAINST RISING INTEREST RATES
Prepare for financial history. on Thursday 2 november, for the first time in a decade, the Bank of England is predicted to vote to increase interest rates. If you’ve a credit card, mortgage debt or savings, the sooner you act to protect yourself the better.
the source of the prediction is Bank of england governor mark carney, who said, ‘in the relatively near-term, we can expect interest rates would increase somewhat.’ combine this with the fact inflation is at a five-year high and, while nowt’s certain, a rise from 0.25% to probably 0.5% looks on the cards. so i wanted to give you enough time to take key actions now in case it happens (and even if it doesn’t, most of this is good to do anyway)... 1 MORTGAGE HOLDERS: Check immediately if you’re on the best possible deal. Those on fixes won’t see any change until their deal ends. Yet for those on variable or tracker mortgages, a 0.25% rise means roughly £200 a year more per £100,000 of outstanding mortgage. worse, many, especially those on lenders’ standard rates, are already overpaying. and while mortgages are currently at all-time lows, a rate rise will likely signal the end of that. so check now if you can save… take 2 mins to benchmark the best deal. my mortgage comparison at mse. me/mortgagebest buys includes all deals available to brokers and directonly deals. Finding a cheap deal isn’t enough – you need to get accepted. your credit history is a huge part of whether you’ll be accepted for any type of credit, including a mortgage. my free mse.me/creditclub shows your score, gives you access to your experian credit file and has tips for how to boost it.
head to clearscore.com to see your equifax file. lenders also do affordability tests. these stress test affordability if rates were 6% or 7%. a good mortgage broker can help match your circumstances to deals that will accept you – as they’ve information that isn’t available to the public. to find a local broker, ask friends for recommendations or use unbiased.co.uk or vouchedfor. co.uk to find one. alternatively, some phone-only brokers such as landc.co.uk are fee-free.
2 SAVERS: Rate rises are good news, but do consider giving yourself the flexibility to move. low interest rates have punished savers, especially older people who saved hard and planned to live off the interest. so a rate rise is positive. check your savings rates – if it’s less than 1%, it’s a rip off, move it. For full best buys, see mse.me/topsavings.
3 EXISTING CREDIT CARD DEBT: If you pay interest, check now if you can cut it.
i’d push anyone who pays interest on existing credit card debt to urgently check if you can do a balance transfer – where you shift it to a new card, with a cheaper interest rate. of course, for most with ongoing debt, the challenge is being accepted.
my balance transfer eligibility calculator at mse. me/bteligibilitycalc shows which 0% deal you’re most likely to get.
of course, with credit card aprs already often over 18%, a 0.25% rise won’t make much odds. yet after years of ever better ‘best ever’ 0% deals, things are now moving the other way, due to warnings about irresponsible lending and a rate rise would add to that mood music.
if you do a balance transfer, as always follow the golden rules. a) clear the card or transfer again before 0% ends or you pay the apr. b) never miss the min monthly repayment or you can lose the 0%. c) you must usually do the balance transfer within 60/90 day.
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