Households with mortgages, credit cards and loans in the UK are facing higher borrowing costs after interest rates were set to rise, according to BBC News, with one mortgage customer telling the broadcaster the change adds around £200 to his monthly costs.
The BBC says mortgages, credit cards and loans could get more expensive for millions of people if rates rise as expected. For borrowers on variable deals or coming to the end of a fixed term, that would mean higher monthly payments at a time when household budgets are already tight.
How rising rates reach the kitchen table
When interest rates rise, lenders tend to pass on the cost fairly quickly for borrowers on tracker mortgages whose rate follows the Bank of England base rate. Those on fixed deals may not feel the change immediately, but they face higher costs when the fixed period ends and they remortgage.
Credit cards and unsecured loans can also become pricier, which means households that rely on borrowing to smooth monthly spending pay more interest for the same amount of debt. It is a combination that can quickly squeeze disposable income.
Why it matters
The consequences go beyond individual bills. Higher mortgage payments reduce what people can spend elsewhere in the economy, while higher borrowing costs make it harder for first-time buyers to get on the housing ladder. Lenders will also look more closely at affordability when households apply for new deals.
What happens next
The BBC reports that rising rates could make borrowing more expensive for millions. Borrowers are likely to be watching their lenders’ announcements, shopping around for better deals and checking whether they can fix their rate or overpay without penalty.
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Anyone worried about repayments should speak to their lender early, as lenders have options for customers in difficulty, and free independent debt advice is available in the UK.
Source: BBC News.
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