November 09 2006
The Bank of England delivered a much-anticipated blow to homeowners when it raised the base interest rate to 5% today.
The increase was necessary to dampen inflation and the UK's booming housing market, and many predict another increase in the new year. However, this hike means that some already stretched homeowners may struggle to make ends meet.
Homeowners hit
Borrowers with fixed or discount mortgages will be protected from the increase, but if your mortgage is at the standard variable interest rate, then you’ll soon see an increase in your repayments.
Switch and save
If you haven’t changed your mortgage in a few years, then you could save thousands by switching to a better deal, and in fact there are several good reasons it makes sense to remortgage regularly:
- Significant savings - If you took out a loan when interest rates were high or a deal you had has now come to an end, the chances are that you can save money by switching.
- Reduce monthly payments - That’s not always the same as saving money overall, as sometimes the main way in which payments are cut is by extending the loan period. But, cutting your monthly outgoings can be important at times.
- Borrow more - You may need extra money for a new kitchen, bathroom or an extension, for example. In theory, you could almost certainly borrow the same amount of money from your existing lender. But sometimes the act of borrowing can serve as a catalyst for going somewhere else.
- Debt consolidation - If you have lots of debts, some of them on exorbitant rates of interest, a mortgage at a lower rate will often help. But beware: your home may be at risk if you default on payments, as a mortgage is secured on your house