The Bank of England has raised interest rates for the third time since August. The monetary policy committee has decided to raise the rate by a quarter of a percent to 5.25% in an attempt to restrain inflation which is riding well above the target level of 2%.
This means that rates have gone up by 0.75% in the last 6 months. This means that in this time the average household with a £150,000 (which is very close to the average mortgage taken out it November 2006) will be paying close to an extra £100 a month in mortgage payments.
Interest rates are rising at a time when the amount of money people are having to spend paying their mortgage is a higher percentage of income than previously. According to the Institute of Chartered Surveyors 22% of monthly household income now goes on keeping up with mortgage payments up from 13.5% in 1996. If you have a mortgage, particularly with a variable rate, you need to make sure you are keeping on top of your finances to avoid running into trouble with your payments.
If you are worried about your mortgage payments then use the MoneyBasics mortgage calculator to see exactly how much you need to be budgeting to keep up with your payments.
This rate rise might well not be the last in the coming months. With rates going up now is a great time to try and get some money tucked away in savings. At the very least everyone should have at least two months saved in case of emergency.
Associate Director, Credit Action
Tel: 0207 636 5214