Mortgages – As usual mortgage lenders were very quick to react to the Bank of England's announcement. If you are on a fixed rate deal then the amount you pay each month as a mortgage payment shouldn't change. Bear in mind that if your fixed rate deal is due to end soon you may find it hard to find another one with such a low rate. However, you will be renegotiating a new deal based on a lower amount owed as you will have paid off a chunk of your mortgage.
If you are on a variable rate deal then expect your monthly mortgage repayments to rise. If you have been paying a special rate and this deal came to the end of its term without you sorting out another deal you would have automatically been moved onto the provider's Standard Variable Rate (SVR). This is usually the most expensive rate that the provider offers so there should be scope for you to easily get moved onto another rate with the same provider without any complicated paperwork.
Alternatively your mortgage deal could be a rate lower than the SVR but still variable. If you are in the middle of this deal you may find you are unable to move onto another deal. If you are within 3 months of it ending then your provider may be able to move you onto another deal early.
If your payments are going up then your provider will need to write to you to inform you of when the increase will take place from. As the interest rate rise was announced at the beginning of the month then the increased rate will probably take effect from 1st September.
Savings – You would have thought that a rise in interest rates would be mirrored in a rise in saving rates. Sadly, this never seems to the be case all round these days. The main increase in savings rates are to be found with the smaller building societies rather than the bigger banks. However, even then you will need to search around for those who are passing on the full 0.25% increase as most are increasing by just 0.1%.
Pensions – If you are looking to retire soon and need to purchase an annuity then the rise in interest rates should have a positive impact on the amount you receive. The company who you buy the annuity off and therefore pays you your monthly pension payments needs to invest your pension pot in order for them to be able to provide the retiree with a lifetime income. To do this they invest the money in government bonds or gilts. These are regarded as safe options as they are backed by the government. However the return from them is linked to interest rates so the very low rates in recent years has made annuity rates drop and drop.
Has the increase in interest rates affected you? Will you be switching mortgage providers or opening new savings accounts?
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