![]() ![]() If you're just joining us, inflation has reportedly come to a standstill - at 8.7% - despite expectations it would fall, raising the odds of the Bank of England increasing rates tomorrow.Īverage savings rates have already ticked upwards, according to data from Moneyfacts. While the prospect of a 0.25 or 0.5 percentage point increase in interest rates would be more bad news for mortgage holders, savers should benefit. Overpaying not only reduces the balance, but also the amount of interest and, more importantly, helps borrowers adjust their finances to a larger monthly repayment before it becomes mandatory. Overpaying a mortgage can be as simple as increasing your direct debit payment, with some lenders allowing borrowers to make ad hoc payments whenever they want – though read the small print as overpayments are typically capped at 10% of how much a borrower owes. "The best strategy for them is to get ahead of a future jump in mortgage costs by overpaying on their mortgage now, even by a small amount while also paying down any unsecured debts such as credit cards, loans and store cards to free up cash." Those whose deals run for another year or two can breathe easy at the moment but that doesn't mean they can't act now to start preparing for an uptick in payments. Ms Haine says those whose fixed deals are due for renewal "should seek out a good independent mortgage broker – one that will deliver practical solutions to the many issues that come with higher monthly repayments". as any increase will be passed on in full". Homeowners on variable rates "must brace their finances for an instant hit. ![]() She goes on: "It might, therefore, be wise to wait and see whether the situation improves before signing up to a product that stretches their finances to the limit." ![]() It means a rise in the Bank of England interest rate seems nailed on tomorrow lunchtime - either by 0.25 percentage points or 0.5.Īverage deals for a two-year fixed are already over 6%, and Ms Haine says "first-time buyers looking to secure a new mortgage now will find their affordability levels heavily compromised by the combination of high inflation and high interest rates". Alice Haine, personal finance analyst at Bestinvest, has been reacting to May's inflation figure - which, despite predictions, did not fall. ![]()
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