Finance platform, Freedom Finance, is urging UK families to review their finances after revealing a future interest rate rise could add more than £750 to the average annual mortgage bill.
While the Bank of England agreed yesterday to keep the base rate at an all-time low of 0.25%, analysts widely predict higher interest rates are likely sooner rather than later.
Freedom Finance reviewed its consumer database to provide a snapshot of the nation’s mortgage finance from July, which showed the average family has a £130,000 mortgage on a 19-year term. A one per cent rise on a lending rate of 2% would equate to an extra £756 a year.
In response, Freedom Finance has launched its #LowRateLockIn campaign to help customers understand the impact of a rate rise on their mortgage repayments via its dedicated online calculator.
Andrew Fisher, MD of Freedom Finance, says consumers should do their sums now and understand the impact even a small increase in interest rates could have on their monthly mortgage payments.
Andrew said: “Once families are armed with the right information they are in a much stronger position to take action to ensure they’re on the best rate for their circumstances and aren’t spending money unnecessarily.
It’s easy to feel helpless when encouraging financial news has been so thin on the ground for such a long time. As a country we’ve become use to financial restraint – everyone from the Chancellor of the Exchequer to the average homeowner has been forced to tighten purse strings. Anything which adds costs to the family budget will have an impact, and for many people even a modest increase can significantly erode disposal income.
While it’s unlikely that we’d see an increase of one per cent in one month, it’s perfectly conceivable that in the space of only a few months many people in the UK will have to factor in a substantial extra cost.
For some that will mean the annual summer holiday has to wait for another year, for others it might mean having to reduce how much they save; some people are having to balance such a tight budget that the impact could be greater still.”