Bank of England Governor Mark Carney announced yesterday that interest rates will remain on hold at 0.5% for the 78th month running.
He did however raise the prospect that rates are likely to rise at the turn of the year. If rates do rise, it’s likely to be very slowly, with a 0.25% rise forecast initially, possibly reaching 2.00% over the next three years.
How could an interest rate rise affect you?
Those with a mortgage
If you have a variable rate mortgage, your monthly repayments are likely to rise. Those with a tracker rate mortgage will see an inevitable increase. Halifax, Britain’s largest lender says that the current average mortgage payment is £698 per month. A 0.25% rise would mean an increase in your monthly payment by around £19 per month.
Pensioners & savers
Retirees relying on their savings to supplement their pension income have felt the impact of low interest rates hardest. Many, no doubt, will greet an interest rate rise with relief.
Those who are perhaps looking to purchase an annuity rates could see rates improve with a rise in interest rates, which means securing a higher income.
Low risk investors with fixed interest bonds could see a fall – bond prices tend to fall when interest rates rise, in order to increase the yield and attract other buyers. Holding a diversified investment portfolio including other asset classes can help to make your investment less sensitive to an interest rate rise.
Why not call us to review your circumstances? We are able to provide a fixed rate mortgage to protect against future rate rises, advise on income producing investments and tell you how diversified your investments are using in-depth data and analysis.