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It's now been five days since the Bank of England increased base rate to 0.75%. Hopefully everyone's had enough time to let it sink in, but that still leaves many with the question: what should I do now?
While everyone's situation is different and so we can't tell you what to do, Moneyfacts.co.uk finance expert Charlotte Nelson has come up with some top tips that should be useful to homeowners and savers (as well as those lucky enough to be both).
"This latest announcement is likely to have borrowers worried about their monthly repayments rising," Charlotte said. "However, the important thing is not to panic but instead use the rate rise as a catalyst to sort out your mortgage."
Charlotte suggests borrowers take a close look at what deal they are on: "Did you just slide onto your lender's standard variable rate (SVR), or do you not know how long you have left before your deal ends? Now is the perfect time to find out. If you still have time left on your deal, set a reminder so you don't fall foul of the SVR."
Those who are already on their lender's SVR – which tends to happen after your initial deal comes to an end, unless you remortgage in time – may want to compare mortgage deals now and see if they can switch as soon as possible. Don't forget to do your due diligence, however, and look beyond the rate at the fees and incentives associated with a mortgage before deciding.
If you need convincing to switch, consider that "if a borrower was on the average SVR of 4.74%, they would be £238.83 a month worse off [on a £200,000 mortgage over a 25-year term on a repayment-only basis] than if they opted for the average two-year fixed rate. With that in mind, perhaps it is time to switch to a fixed rate deal to create a buffer against any other rate rises."
Borrowers that are already on the most cost-effective deal for them shouldn't sit on their laurels, either. Consider overpaying your mortgage to become mortgage-free ahead of schedule, that way you won't have to worry about what base rate does to your mortgage anymore – just check if your provider has any limits on how much you can overpay before transferring the money.
Savers should be much happier with base rate going up, as Charlotte points out that "A base rate rise was at the top of savers' wish list. However, just because the Bank of England has raised rates does not mean savers get to sit back and relax, particularly if the last rate rise in November 2017 is anything to go by."
We've already touched on this yesterday, reporting that 65% of easy access accounts pay less than base rate. Charlotte reiterates that if you're sitting in an account that pays less than 0.75%, "now is the time to switch."
It's not just a good time to look at your easy access savings, however. "This is a great time to reassess all your savings accounts," Charlotte says. "Look at not only who they are with but how much you have stashed away, what type of savings account they are and most importantly how much interest they are paying."
That said, if you're coming to the end of a fixed rate bond term, you may want to wait just a little while before switching your savings to one of the highest-paying fixed rate bonds currently available. We may not be able to expect a full 0.25% increase on all savings accounts, but "tying up your cash for a long time without access now may mean you miss out on better deals later on," Charlotte warns. "It would be wise to consider a mixture of easy access accounts and short-term fixed rate bonds to benefit from the higher rate of a fixed product as well as the movability of an easy access account."
Lastly, to make sure you can take advantage when or if providers do improve rates, you may want to keep a close eye on the Best Buy charts. As Charlotte says: "This is a time of upheaval, so you may want to check them a little more often to see if you can get a better deal."
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