On the 2nd November, The Bank of England announced that the base rate would rise from 0.25% to 0.5% in the first interest rate rise in the last ten years. Although this isn’t a large increase and it sees the base rate return to how it was pre-EU referendum, millions of people will experience a change in their finances.
Here we look at the real cost of an interest rate rise to see what the Bank of England’s changes could mean for you.
Assuming their interest rate has risen from 3% to 3.25%, a homeowner with a mortgage debt of £200,000 over the course of 25 years could see their monthly repayments grow from £948 a month to £975 a month. Although this might not immediately seem like a huge change, this money could have paid for a gym membership.
Following an interest rate rise, a homeowner with a mortgage debt of £400,000 at 4% over 28 years could see their repayments grow from £1,980 to £2,037. This is an increase of £57 a month, seeing households spending the equivalent of a week’s food shop on interest payments unnecessarily.
Someone with a mortgage debt of £270,000 over a 28 year term could see their repayments rise by £33 a month if their interest rate increases from 2% to 2.25%. This money could have been put towards a mobile phone contract on a new phone, but instead it’s being spent on interest.
A family with a mortgage debt of £450,000 over the course of 30 years could see their mortgage repayments rise by £66 a month if their interest rate rises from 4% to 4.25%. Over the course of a year, this adds up to an extra £792 a year or the equivalent of a holiday for two.
If you’re concerned about the impact an interest rate rise will have on your finances, please get in touch with the team at TaylorMade. Our team of talented and experienced mortgage brokers will assess your finances, identify the most affordable mortgage deals for you, and help you remortgage your property.
