Take advantage of frozen interest rates
The Bank of England has voted to keep interest rates at 5.5% in February despite fears that lower rates are need to support the slowing housing market.
Economists and mortgage lenders were widely predicting the central bank to cut rates this month to help combat economic conditions. Halifax, the UK’s largest bank, recently warned that lower interest rates are essential to keep the housing market afloat in 2008.
An interest rate cut would have provided some relief to people on tracker rate mortgages and potentially those on standard variable rates. But just because rates have been frozen there is no excuse not to relook at your finances and see where savings could be made.
Mortgage brokers say that tracker rate products are currently cheaper than fixed rates, and are likely to remain so if interest rates are cut later this year. However, the type of mortgage you take out will depend on your needs and circumstances so take some time to research what type of mortgage is best for you before making a decision.
If you already have a mortgage and are currently paying the lender’s standard variable rate then you should think about moving onto a new deal sooner rather than later. Lenders take advantage of borrower inertia by charging high interest rates once their discounted period on a fixed or tracker deal has expired.
If you are on a standard variable rate then you’ll probably be surprised to know how much you could save by switching to a better deal. Speak to your lender about what other deals it can offer you and then consult with a mortgage broker about how this compares with other products on the market.
People with their savings in variable rate accounts will be relieved to hear that interest rates remain unchanged this month. But if you want to protect your nest egg then you could consider opting for a fixed rate deal.
Fixed rate accounts are so popular at the moment that many banks and building societies are closing their deals to new customers just weeks after launching them. There are still some competitive products out there, but it’s well worth getting in quick.
However, if you haven’t utilised your £3,500 ISA limit yet, then time is running out for you to do so. In the countdown to the new tax year ISA rates tend to get more attractive so now is a good time to find a deal.
The interest rate freeze provides an opportunity for mortgage borrowers and savers to take another look at their finances. You can calculate whether you could be better off on a different deal or find the most competitive savings products with our free tools and calculators.
Invidivual Savings Accounts were introduced on 6 April 1999 to replace personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs) with one plan that covered both stockmarket and savings products, the returns from which are tax-exempt. The ISA is not in itself an investment product. Rather, it’s a tax-free “wrapper” in which you place investments and savings up to a specified annual allowance where the returns (capital growth, dividends, interest) are tax-exempt (you don’t have to declare ISAs and their contents on your tax return). However, any dividends are taxed within the investment, and that can’t be reclaimed.