For the first time in ten years the Bank of England have voted at the Monetary Policy Committee meeting to increase the Bank Base Rate from the record low of 0.25% to 0.5%.
This has had an immediate effect with many lenders increasing their Standard Variable rates in line with this increase. The knock-on effect to those who have allowed their mortgage to sit on their lenders Variable Rate will likely occur from their next repayment when they will be paying more for their mortgage each month. For many, this will be the first increase in rates that they will have seen since purchasing their homes and will no doubt come as something of a shock. However, and as a bit of a sobering thought in the Summer of 1988 interest rates were residing at 7.8% and by the Autumn of 1989 they had risen to 14.875%.
If you think that was scary, in November 1979 the Bank of England Base rate hit 17% and stayed there until July 1980 when it was reduced to 16%! Now that is seriously eye watering.
Of course, there is a simple way to grab some stability for your mortgage and that is fix your rate at the best rate available to you. Rates may stay static or remain low for a good while longer, but how would you cope with 9 months at 17%?*
Your home may be repossessed if you do not keep up repayments on your mortgage.
You may have to pay an early repayment charge to your existing lender if you remortgage.
*source - www.bankofengland.co.uk/boeapps/iadb/Repo.asp