How homeowners can offset rate rises
Homeowners are becoming increasingly nervous about the Bank of England’s monthly interest rate decisions.
There have been five rate rises in the past 12 months, and the latest rate-setting meeting takes place next week.
For many people, another hike could be the last straw.
As a result, four out of ten borrowers now get anxious in the run up to the Bank’s meetings, says Intelligent Finance.
The traditional way to protect yourself from this kind of worry is to take a fixed-rate loan.
But, as the internet bank and mortgage lender points out, another solution is to transfer to an offset mortgage.
As the name suggests, these offset your savings against your debt – saving thousands of pounds of interest over the mortgage term, and allowing you to clear your debt years early.
IF’s managing director Mark Parker says: “With interest rates on the rise and purse-strings tightening, it’s important to make every penny work as hard as possible.
“Offset mortgages give peace of mind, negating the effects of a rate hike and giving the flexibility to lower monthly payments.”
Offsets don’t work for everyone though, and if you don’t have a large savings pot, they can actually leave you worse off than a traditional mortgage deal.
So make sure you do your sums before signing up for one of these loans.
