Know your Mortgage

24 September 2015

Know Your Mortgage Infographic

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Know your mortgage

 

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KNOW YOUR MORTGAGE
The Bank of England Interest rates could start to rise by the end of 2015.  What does this mean for you and your mortgage?

WHAT TYPE OF MORTGAGE DO YOU HAVE?
12% of people don’t know the difference1

  • Fixed rate
    47% of all regulated mortgages outstanding are on fixed rates. 2
    Payments stay the same for a fixed period of time so are unaffected if interest rates rise.
  • Variable/Tracker rate
    Payments may increase when the Bank of England interest rate rises or decrease when the rate falls.

If you’re still unsure what type of mortgage you have check with your mortgage provider.

THE GOOD NEWS
Even if rates rise, they will still be far lower than by any historical standard.

Did you know that when you apply for a mortgage, your ability to make the repayments is tested on a higher rate than your actual mortgage rate? This should give you the confidence to know that you can cope with an interest rise.

HOW WILL MY PAYMENTS BE AFFECTED IF I AM ON A VARIABLE RATE?
Let’s take a mortgage rate of 3.11% 3 with a 20 year term remaining as an example.  Here’s what would happen if the interest rate rises by 0.25%:

£6.55 = 3 takeaway coffees per month4
£13.10 = a new CD or DVD per month5
£19.65 = 1½ half pints a week6
£26.19 = 2 shop-bought lunch meal deals per week7
£32.74 = Satellite TV package 8

WHAT CAN WE DO? 

  1. Know your rate (only ½ of people are certain of the interest rate of their mortgage)
  2. Follow the news
  3. Prepare for mortgage milestones (Mortgage milestones include rate changes, discount rates drop off, end of fixed rate)
  4. Use a mortgage calculator to work out how changes affect you
  5. Look at your household budget and cut back on the luxuries.

  1. Based on the findings of a survey we conducted in summer 2014 of 1000 adults across England and Wales
  2. Council of Mortgage Lenders
  3. As used as the average mortgage rate in the Council of Mortgage Lenders ready reckoner: http://www.cml.org.uk/news/press-releases/4021/*
  4. 3 medium cappuccinos from Costa Coffee based on 2015 prices = £7.35
  5. Now 91 double CD = £13 on www.amazon.co.uk*
  6. Average pint of beer in UK = £3.31 http://cask-marque.co.uk/cask-matters/good-pub-guide-2015-reveals-cost-average-pint/*
  7. 8 x Boots £3.29 meal deals per month = £26.32
  8. Sky Variety Bundle = £30 per month http://www.sky.com/shop/sky-bundles/*
*By clicking on the links you will leave the Principality website - Principality is not responsible for the content of external websites.

Published: 24/09/2015