With inflation continuing to rise it was inevitable that interest rates would have to increase again and that is precisely what has happened this week. The rate has been increased from 1% to 1.25% and it is highly likely that this will not be last increase we see this year.
If you have a mortgage or any other form of credit the increased interest rate will affect you but if it pushes you over the financial edge, you will be able to seek help. Here’s what you need to know:
How will my mortgage payments be affected?
Nearly two million homeowners are on variable rate and tracker deals, meaning they will see an increase in their repayments. The increase is expected to add roughly £21 a month (£252 per year) – to the average repayments for a borrower with a £150,000 mortgage who is on their lender’s standard variable rate.
How about other forms of credit?
Borrowers will also see the cost of personal loans, overdrafts and credit card repayments increase.
What if I can’t afford my repayments?
The financial regulator, the Financial Conduct Authority (FCA), has written to 3500 lenders this week and told them they must help their borrowers who are struggling with the cost-of-living crisis and therefore struggling with repayments. Specifically, the FCA has told lenders they must:
- Provide customers with an appropriate level of care and support.
- Give borrowers in financial difficulty appropriate tailored forbearance (i.e., being allowed to pause payments) that is in their interests and takes account of their individual circumstances.
- Support borrowers showing signs of financial difficulty or struggling with debt.
- Ensure that any fees and charges levied on borrowers in financial difficulty are fair and do no more than cover the firm’s costs.
- Make sure their approach to taking on new borrowers takes account of the financial pressure they may be facing and the impact on their expenditure.
- Consider what more they can do to encourage mortgage borrowers to think about switching to a less costly option where it is available.
- Help consumers avoid falling victim to scams or illegal money lending.
You can see the letter the FCA sent to the lenders here: https://www.fca.org.uk/publication/correspondence/dear-ceo-letter-rising-cost-of-living-acting-now-support-consumers.pdf