The Bank of England has announced the first rise in interest rates since 2007. After the Brexit referendum last June, the Bank of England reduced the cost of borrowing to 0.25%, but this announcement brings the interest rate back up to 0.5%. The people who will be most adversely affected by this increase are those households with variable rate mortgages. If you have a variable rate mortgage, your payments will increase because of this change.
Find out how you will be affected
You can check how you will be affected by this rate rise by using our rate rise calculator. Enter your outstanding balance, current interest rate and remaining term and then use the sliders to determine how your payments will be affected by the increase of 0.25%. Many people with mortgage or secured loan arrears may have entered into repayment arrangements with their lender either before or after court proceedings. These arrangements usually stipulate that you pay your regular monthly instalment and an additional payment towards the arrears each month. Because the base rate has increased, the amount that you have to pay to honour this agreement is also likely to increase. Your lender should write to you with details of your new payments. You may need to vary any standing orders or direct debits to your lender to ensure that your payment amount still reflects the terms of the agreement.
Will SMI increase because of the rate rise?
The amount of Support for Mortgage Interest that a household in receipt of income-related benefits receives will not increase as a result of this interest rate rise. The rate used to calculate SMI payments is currently 2.61%. It reduced from 3.12% in June 2017. The rate used to pay SMI is tied to the average rate offered for mortgages in the UK and will only change if this rate increases or decreases by 0.5 percentage points or more.
If you've previously been to court about your mortgage or secured loan and you are worried about the impact of this rise, or if you would like some advice on dealing with potential or actual mortgage arrears you can call Housing Rights for free, independent advice on your options. Call 028 9024 5640 and choose option 4 to speak to our mortgage debt advisers. Our phone lines are open between 09:30 and 16:30 Monday to Friday.