"With worries around economic growth, its no surprise to learn that the base rate is being held at 0.5 per cent for the 27th consecutive month. However, this situation cannot continue indefinitely and consumers, especially those with variable rate mortgages need to be aware of the impact a rate rise could have on their outgoings.
"Should base rate rise by just 0.5 per cent monthly mortgage payments for homeowners with a £150,000 variable repayment mortgage on an average 4.80 per cent SVR would rise by £43.80. If the base rate rises by one per cent, their monthly repayments would jump by £88.70, representing a huge hit to their finances.
"Since the base rate dropped in March 2009, many consumers have taken advantage of lower mortgage payments and absorbed the savings into every day living costs. The danger for these consumers is that when rates rise, as they inevitably must, many will find they don't have the ability to cope with their increased repayments. The uncertainty around exactly when rates will rise puts home owners in a tricky position and anyone with a variable rate mortgage needs to consider their options carefully. On the one hand moving to a fixed rate product will protect them against sudden repayment rises, however, if base rate continues to remain at current levels or rises very slowly, they could be stuck paying over the odds for a considerable amount of time.
"For savers, while a base rate rise can also be seen as a boost, it worth noting that there are some excellent deals available for those prepared to lock their money away. Consumers need to weigh up the risk benefits of generating some interest on their savings now against the possibility that rates will rise soon and rise sharply. My advice, especially those with savings pots lingering in poorly paying accounts, is to be proactive, shop around for the best deal get their money working for them."
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