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Property News > British Home Owners Not Prepared for Interest Rate Rise
British Home Owners Not Prepared for Interest Rate Rise
Each time the latest interest rates are revealed, there is always an expectation that they will be changed. With the holding off of these changes though, it seems that homeowners have become a little complacent when it comes to the impact that the much-anticipated rate change will bring.With current speculation looking towards an increase in interest rates soon, maybe even next month, there is evidence that the prospect of the change is having an effect. Some lenders have acted early, withdrawing lowest rates, but borrowers aren’t showing much sign of being prepared for the impact it will have on their mortgage payments and savings.New research by lender TSB has shown that 68% of homeowners don’t know what effect a base rate rise will have on them. They are also unaware that they could save money by having a fixed rate mortgage rather than the riskier option.If the rate was to rise by 0.25% as an example, then the payment for a variable rates mortgage will cost an extra £13 per month. If they were to move to a fixed rate deal, then they could actually save £199 per month instead. With there being such little change in the interest rate by the Bank of England, homeowners have become complacent of the changes that they face. They don’t actually expect any change to their payments.This could be changing now that Bank of England Governor Mark Carney has made hints that the rate will rise. While it is just speculation that it could happen soon, the risk is still there. It is something that homeowners should be more aware of.It is easy to see why the complacency has set in for homeowners. The fact that interest rates haven’t risen in the last ten years and the types of mortgages people have taken have been solely based on that fact. Tracker or variable rate mortgages, which have felt safe in the past, could see payments changing.In the research done by TSB, they found that 66% of homeowners do show some worry that rates could rise, but 68% don’t understand how it will affect them. This is a worrying sign for them, as the changing rate looms in the future, and could result in payment rises they haven’t planned for.While there isn’t a way to fix the situation for everybody, changing to a fixed rate deal may be a wise choice; especially in the unpredictable built up to Brexit, which could have an impact on the interest rate in the coming years.The key is to understand what the base rate changes will bring. Being prepared for this will help homeowners save money, instead of seeing a sudden rise in payments that could make the cost of living that little bit more pricey in the future.
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