The governor of the Bank of England, Mark Carney, has suggested that interest rates could rise “in the near term”.
Many experts think that could mean as early as November.
So how would a rate rise of 0.25%, to 0.5%, affect borrowers and savers?
We know there are more savers than borrowers, so more people are likely to be pleased at the prospect of rising rates, than those who will be disappointed.
Will my mortgage be affected?
According to the Bank of England, 43% of homeowners are on variable or tracker rates. In theory most of those will see their mortgage repayments rise when the Bank of England raises rates. By contrast 57% of borrowers are on fixed-rate deals, and will not be affected immediately.
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How would a rise affect repayments?
According to the Nationwide Building Society, a 0.25% rise in base rates would have a modest affect on anyone on a standard variable rate (svr). On the average mortgage of £125,000 an increase of 0.25% would increase monthly payments by £15 to £665. That would amount to an extra £185 per year.
The following table assumes there is 20 years left on a mortgage, and that the rate rises from the current average of 2.56% to 2.81%.