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Interest Rates Are Rising!

What does this mean for current and future homeowners?

The current national interest rate is at an all-time low of 0.1% due to the Covid 19 pandemic. With the government set on rising the percentage up to at least 2% soon there has been some discomfort throughout the country on what it means for us.

This will now make purchasing/owning a home with a mortgage that little bit more expensive. The average family home being six times the average salary and no sign of minimum wage increasing, High-street retailers will see a decrease on income when the rates change due to having less to spend each month.

Homeowners with tracker mortgage deals should see an immediate change to their monthly payments, as their rate is directly pegged to interest rates. The average mortgage is on a 5-year fixed rate so anyone with a newer mortgage is in the clear for a small amount of time but are still going to get affected by the increase.

Although people that are not on the housing ladder will have to pay back a higher amount on their mortgages, they do have the benefit of the increased interest on their savings. This may not be a lot of extra money for some people, but every penny helps when saving.

Why are the interest rates going up?

After the 2008 global financial crisis the bank of England dropped interest rates down to 0.5%. As mentioned earlier due to the Covid 19 pandemic we saw the rate drop again to 0.1%. It was inevitable that the rates were going to increase due to the demand of requests to borrow money from lenders.

With the interest rates increasing we should see the value of the pound go up as well. With a stronger pound we will see the UK exports become less competitive, reducing exports, and increasing imports.

With regard to the affect the rise in interest rates may have on Wilsons clients mortgages and investments, we have expert, trusted associates who can offer specialist, independent advice. Should the need arise, please don’t hesitate to call us and we will be delighted to provide you with further details.

By Ben McCaskey

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