If you are somebody who is pretty diligent and on-the-ball when it comes to their finances, you won’t have overlooked some of the additional expenditure that will have come your way in recent months.
Your latest energy bill might have caused you to raise your eyebrows, while the cost of petrol at the moment is enough to make your eyes water.
Such rises to the cost of living are not much fun. But things could get worse before they get better, with the Bank of England’s Monetary Policy Committee set to meet later this week and green-light a 25 basis point rise in interest rates.
Why is this happening?
The Bank of England is trying to keep inflation rates at 2%, but at present they are significantly higher than this. This means that rate increases will need to be utilised in an attempt to prevent further economic woe down the line.
The anticipated rise would see interest rates rise to 0.50% – their highest point since 2017. And with predictions for rates to rise to 1% by the midpoint of this year and 1.25% by the year’s end, this is something to keep tabs on as a homeowner.
An expensive few months?
For homeowners with a variable rate mortgage, the rise will see higher payments required to cover your mortgage.
If you are a homeowner with a fixed-rate mortgage, the good news is that any interest rate changes will not have a direct effect on you until the end of your current fixed-rate period.
That doesn’t mean however that you are going to avoid seeing a strain on your pursestrings. The outgoings across other elements of your spending will be felt without doubt.
What type of mortgage should I get?
If you are in the process of looking for or securing a mortgage in the coming months, then understanding the rate rises and how to find a deal that works for you is worthwhile.
Given the current climate, a fixed-rate mortgage should really be a priority for anybody looking to secure a mortgage at present. That will give you a manageable and consistent outgoing month-on-month, around which you can manage your other finances more easily.
For contractors or freelancers, seeking a specialist contractor mortgage broker or freelance mortgage broker can pay dividends here. The last thing you want is to be signing up for a mortgage deal that is not in your best interest, if you excuse the pun.
Analysing the situation
It’s easy to get peeved off about interest rate rises and the cost of living, particularly when you find yourself spending what seems like a small fortune on things that not so long ago wouldn’t have put such a hole in your pocket.
But these things should be looked at in a wider context. Inflation is something the Bank of England needs to get on top of. Interest rate hikes such as the rise anticipated for later in the week are an attempt to stem the flow and bring some economic stability back to the UK.
The difficulty is that after two years of upheaval caused by the pandemic, the economy is fragile. The cost of living and interest rate rises will feel like an additional grievance on top of everything that has played out.
The truth is that for the individual, they are unavoidable. As a home owner, seeking the type of mortgage which gives you the greatest stability in these tumultuous times will only stand to benefit you.
