How to prepare for an interest rate rise

It was no surprise that the Bank of England's Monetary Policy Committee (MPC) voted to keep the base rate on hold at 0.50% last month. But, after 24 months of flat interest rates, it's time for borrowers and savers to start preparing for rate increases.

While it's still impossible to say exactly when base rate will begin rising again and how far they'll go up by, it looks almost certain that it will happen this year and a growing number of economists believe the MPC could announce the first base rate increase as early as this week.

So, as it seems just a matter of when and not if the base rate will rise, here are a few things to bear in mind:

Consider remortgaging

A rise in interest rates will mean those on a tracker-rate mortgage or their lender's standard variable rate (SVR) will see a price hike.

If a rate hike would make your mortgage payments unmanageable, it's wise to start looking for a fixed-rate mortgage deal now. There are some competitive deals on the market.

Read our round-up of the best mortgage rates

Prepare for a hike

If you don't want to or can't remortgage, start preparing for the rise. A small rise this year may not affect you much, but if there's a rapid rise you could feel the pinch. Start cutting your outgoings each month and putting a little extra aside.

Time to review your savings

If the base rate rises then savings rates will go with it, so putting your savings in a fixed bond right now may not be the best option. It's advisable to adopt a 'wait and see' approach and keep an eye on what the rates do.

But be warned, when they do start to go up, it may be a slow and steady increase rather than a rapid rise.

Read our round-up of the best savings rates

Your Comments

Yes,interest rates will rise but that does not mean our greedy bankers will pass on the hike.Notice how stealthily some of them have reduced rates over the past 12 months?