Interest Rate Rises: Action You MUST Take NOW!
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I’ll tell you what rising rates means for you and what action you should be taking…
1. Home Owners with a Mortgage
USA Fixed rate for 20-30 years, no action needed
But for the rest of us outside the USA, we may only be able to get a 5-10 year fixed rate at best
Many on variable or tracker - NO! Fix now. 26% of UK home loans are on a variable rates, or 2.2 million mortgages, of which 40% on a tracker.
Almost no one has fixed!
UK Bank Rate rise to 0.5%, the monthly payment on an average tracker mortgage will increase by £25.76, and the monthly payment on the average SVR (standard variable rate) will increase by £15.96. That’s an additional £309 per year
This will only get worse. I expect the BOE Bank rate to hit 1.25% later this year in 2022 - and even further next year
Homeowners with £250,000 of borrowing will have to pay an extra £1,956 a year, compared to the start of the year, while those with £450,000 of borrowing will have to find an extra £3,528 a year, or £294 a month
Fix your mortgage now, you can still get 2% in the UK on a 7-10 year fixed if you have enough equity, and 3.6% in the USA on a 30 year deal
Someone with £250,000 of borrowing on the average standard variable rate mortgage now could save £5,316 a year
2. Inflation & Savings
USA Inflation is currently 6.8% & UK Inflation is 5.4%
But both are forecast to go to 8% in the USA & 7% in the UK by April
If you have $/£10,000 saved at 1% interest = £100 interest
If you have $/£10,000 saved at 1.5% interest = £150 interest
Vs inflation at say 7% means your $/£10,000 = $/£9,300 in purchasing power + the £$100 in interest so £$9,400
3. Loans and Credit Card debt
Most personal loans are on fixed rates, so you shouldn’t be directly affected by interest rate rises, but you can be inadvertently affected
If employers start to feel the squeeze, they usually start cutting costs, and that means staff, or possibly your job
Credit card rates are variable, so it depends on the country, they won’t necessarily automatically go up, but many will raise costs to offset the interest rate rises
American Express for example, recently announced it would be charging its cardholders more, blaming the rising cost of offering rewards. They are already at a 23-year high
Conclusion: Pay off debt! Consolidate debt now! Darker days are coming.
Better to pay down debt now, start an emergency savings account and feel more secure.
DISCLAIMER
This video is for entertainment purposes ONLY & designed to help your thinking, not direct it. These videos shall NOT be construed as tax, legal or financial advice and may be outdated or inaccurate; all decisions made as a result of viewing are yours alone.
Sponsorships: Neil McCoy-Ward may earn an affiliate commission or referral bonus from any product or service listed or discussed.
interest rate risesinterest ratesmortgage rates 2022
