How Will A Base Rate Rise Affect Your Loan?
There has been much talk and speculation about the probability of an increase in the Bank of England base rate for loans and savings over the course of the past few months and the main question is when this will happen, rather than if it will happen.
But despite this fact, it would seem that many people in the UK are unaware of what effect an increase in the base rate would have on their home owner loan or mortgage repayments, according to new research from Unbiased.co.uk.
A recent survey found that around 22 per cent of people with a home owner loan had very little idea of what would happen to their loan repayments in the event of a base rate rise. In fact, for some borrowers who took their loan out within the last two years, they will never have experienced a change in the base rate.
Of those borrowers whose loan is on a standard variable rate, 16 per cent had no idea what would happen to their loan repayments in the event of a rate rise. A further 16 per cent thought that their repayments would increase, but not by as much as the base rate rise.
It is also a similar story for those with a tracker rate loan and even 28 per cent of borrowers with a fixed rate loan are in the belief that their loan repayments will increase when the base rate rises.
Karen Barrett of Unbiased.co.uk said “Predictions of when the base rate will increase are drawing ever closer, but when it happens it will come as a surprise to many home owners. The base rate increase is inevitable and so when this happens home owners need to ensure that they are prepared for what this increase will mean for their personal finances.”
