Uswitch urges caution over interest rate rise report by Bank of England

Commenting on a new report by the Bank of England claiming the majority of households could cope with a rise in interest rates, Nick Frankcom, Money Expert at Uswitch.com, says: “Young people could be penalised yet again if predictions by the Bank of England come to light. A rise in interest rates could be the final nail in the coffin for young people already struggling to get onto the housing ladder. It’s already difficult for first time buyers to save up a deposit for a property and a hike in interest rates will skyrocket monthly mortgage repayments.

“The report’s predictions also rely on wages increasing by 10%, which will feel like a pipe dream for households who have been struggling with rising living costs and stagnant wages.

“Burying your head in the sand is not an option. For example, a borrower with a £200,000 mortgage paying 4% over a 25 year term will spend an extra £237 a month as a result of just a 2% rate rise. All borrowers should do some quick sums about what they could afford to borrow. If you have a mortgage, could you get by with around £200 less a month? If not, think about ways to cut your spending sooner rather than later.

“Take a good look at your household budget to see where it’s possible to cut costs. It’s easy to make sure you aren’t paying over the odds for your existing debt and are getting the best rate on products like credits cards or loans. Mortgage and lending borrowers need to shop around for the best deals while they’re still available. There are five year fixed rate mortgages available which will give consumers some much needed security about future spending.”