Finally, a pause to rising Base Rate

Commenting on today’s decision by the Bank of England to hold the Base Rate at 5.25%, Sarah Pennells, consumer finance specialist at Royal London said:

"After a spate of consecutive interest rate rises, this is a welcome pause for borrowers. Those on a tracker rate for their mortgage will doubtless be relieved that they will not see another rise in their repayment amounts. However, today’s decision by the Bank of England to leave the Base Rate at 5.25% won’t help people whose current fixed rate mortgage is near its end, as they’re likely moving off a rate that was cheaper than the new fixed rate deals available. For some, these higher repayment amounts will be unaffordable or a huge stretch on their finances.

"Although savings rates have been getting higher, with best buy easy access accounts paying over 5%, they have not kept pace with the rises in the Bank of England base rate. It's vital that savers shop around to see whether there is a better rate available for them."

Sarah’s tips:

• If you’re nearing the end of your current fixed deal, you can start to look at your options and secure a new deal with a lender around six months in advance of the mortgage start date. If you’re concerned rates will continue to rise, it’s best to act as quickly as you can to put a new fixed rate deal in place and avoid moving onto a lender’s standard variable rate. Under the Mortgage Charter, most lenders have agreed that you will also be able to ask for a better like-for like-deal with your lender right up until your new term starts.
• Get in touch with your lender if you’re worried about being able to afford your mortgage. Contacting your mortgage lender in this way won’t have any impact on your credit file.
• It is much better to have the conversation with your lender early so they can look at available support options with you before you find yourself with any mortgage arrears. Contacting them before you miss payments, or as soon as you’re falling short on payments, means there may be more options available to you to help make your payments affordable.
• Mortgage lenders that have signed up to the Mortgage Charter have said customers who are up to date with their mortgage payments will be able to switch to interest-only payments for six months or extend their mortgage term to reduce their monthly payments. The lender won’t need to carry out an affordability check and it won’t affect the customer’s credit score. However, customers who want to go back to their original mortgage term will have to contact their lender within the six-month period.
• If you’re struggling with other household bills or you’ve received letters mentioning repossession, contact a free-to-use debt advice charity, such as StepChange, National Debtline or Citizens Advice, or the financial poverty charity, Turn2us, straight away.
• Savers should make sure that they’re making the most of their tax-free allowance and reviewing the rates offered on existing savings accounts as there can be more attractive options out there as providers tend to offer their highest interest rates on new customer accounts.