Three impacts the rate rise could have on you

All eyes were on the Bank of England recently as its Monetary Policy Committee met on 21st September 2022 to agree its next steps to tackle inflation. 

At midday the committee announced an interest rate rise of 0.5 of a percentage point to 2.25%. 

It is another jump in the interest rate but it may not be the last. Some observers are suggesting it will be one more step on a ladder which may reach at least 6% by next year.

Historically, even this will still be low – but the current interest rate is the highest for 14 years and comes as a blow to many people already struggling with the effects of inflation and recession.

At Continuum we are looking at three main impacts – and at what you could do to deal with them.

1. What is the impact for home buyers?

Anyone with a mortgage is likely to feel the effect of the rate rise. Those on variable rate and tracker mortgages are uniquely vulnerable and will see their monthly payments soar immediately.

But even those who have been able to swap their mortgage for a fixed rate will be enjoying only a temporary reprieve. Almost two million homeowners will be hit with mortgage pain next year as their fixed deal periods come to an end.

2. What is the impact on Buy-to-Let investors?

Buy-to-Let landlords are already being squeezed as rising costs and rocketing energy bills damage tenant finances. An increasing number of tenants have found themselves in financial difficulties and rent increases are starting to become a reality in some parts of the market. A cut in income comes on top of extra costs and tax burdens. 

An increase in the cost of a Buy-to-Let mortgage could be the last straw for some.

Some landlords are selling up their rental properties and moving their investment into commercial property, with the hope of potentially more reliable income and less regulatory red tape.

3. What does it mean for savers?

Of course, where there are losers there can be winners, and an interest rate rise should be good news for savers. Saving accounts are starting to look a little more worthwhile, and the rate hike from the Bank of England should trigger a wave of better interest offers from high street (and online) banks and building societies.

Interest rates on offer may not be equal to inflation, which means that the cash you deposit will still lose its purchasing power. But it may be worth putting money away again.

What should you do?

The interest rate jump comes as bad news for many people. The good news is that at Continuum we can work with you to provide answers to the problems it sets you.

We can look at potentially more affordable solutions to your mortgage needs and search the entire lending market to find the remortgage deal that is best for you.

We can look at your savings – and help find ways to turn a higher interest rate into an opportunity, rather than just a cost.

Call us today for the solution you need.

The Financial Conduct Authority does not regulate deposit accounts and some aspect of buy to let mortgages and commercial mortgages

The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable mortgage products or investment strategy, you should seek independent financial advice before embarking on any course of action.

The value of investments can fall as well as rise and you may get back less than you invested.

Your home or property may be repossessed if you do not keep up repayments on your mortgage.

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