Top tips: how to prepare for a rate rise
If you, or someone you know, is concerned about meeting mortgage repayments, here are a list of steps you can take, courtesy of TSB.
Understand your current mortgage
Do you know if it’s a tracker, SVR or a fixed rate mortgage? When does the term end? Do you have any early repayment charges? It’s important to understand the current terms of your mortgage first before you make any changes. Contact your provider to find out this information.
Keep a realistic track of your spending
Knowing how much money you are spending each month is really important as you can then measure it against your income to see what you might have leftover. It’s important to be accurate, so remember to add in any entertainment subscriptions, take-away lunches or nights out into your monthly plan. Apps such as ‘On Trees’ from MoneySuperMarket can really help with this, or just good old fashioned pen and paper to keep track of your spending.
See where you might be able to cut back
After you have kept a realistic track of your spending, you might realise that you are spending more than you are earning – in that case, it’s time to start thinking where you can cut back. Spending money on lunch and coffees at work can be a real drain. Why not commit to taking in lunch every other day? TV and entertainment packages are also another expense which you may be able to cut back.
Think about how to increase your income
As well as cutting back, you might be able to increase your income. For some people, this could be taking on a second job, working overtime or perhaps taking on a lodger, as long as your provider allows you to do so. It’s also worth ensuring you are receiving all of the government benefits and tax credits that you’re entitled to.
Speak to your lender
Once you understand what type of mortgage you have, and also have a solid understanding of your spending, it’s a good idea to go and speak to your lender. It is likely they’ll be thinking about base rate changes too, and so can explore whether remortgaging would suit your circumstances, taking account of all the relevant costs, fees and interest rates.
Remember many lenders provide mortgages, not just the bank where you have your main current account or existing mortgage. Also remember that a mortgage lender is only likely to consider its own mortgage range whereas a broker may present more options, but is likely to charge for their advice.
Look beyond just your mortgage
Any increase in the base rate may affect your finances beyond just your mortgage, including interest rates on overdrafts and credit cards, but may also positively affect your savings rate. Think about moving your savings or current account to see if you can make your money work harder for you, or possibly switching credit card provider to a 0 per cent balance transfer card.
Speak to an independent debt professional
If you are struggling with debt, it is worth seeking debt advice from registered and recognised organisations that have extensive experience providing advice to consumers in financial difficulties. These include, Citizens Advice (www.citizensadvice.org), National Debtline (www.nationaldebtline.org) and Step Change Debt Charity (www.stepchange.org).
No-one is suggesting the base rate is going to increase significantly any time soon so don’t panic. There is still time to plan for any future increase, and like anything, preparing early is always the best plan of action.