Mortgages Doncaster: Why Are Interest Rates Increasing?
Posted on 20th June 2023 at 16:58
In May 2023, the Bank of England increased interest rates for the twelfth consecutive time in its ongoing efforts to control high inflation.
The policymakers at the UK central bank decided to raise rates by an additional 0.25 per cent, resulting in a base rate of 4.5 per cent, which is the highest it has been since 2008.
In May 2023, the Bank of England increased interest rates for the twelfth consecutive time in its ongoing efforts to control high inflation.
The policymakers at the UK central bank decided to raise rates by an additional 0.25 per cent, resulting in a base rate of 4.5 per cent, which is the highest it has been since 2008.
Dragonfly Financial Services is dedicated to assisting individuals in Doncaster who have mortgages by providing them with the most suitable options for their individual circumstances and ensuring a smooth path towards property ownership.
Our primary goal is to help you secure the most suitable product for your individual circumstances and guide you through the process with expertise and support.
What are Interest Rates?
An interest rate is a way to measure how much it costs to borrow money or how much you can earn from saving money.
When you borrow money, for example, from a bank, the interest rate is the extra amount you have to pay on top of the loan. It is shown as a percentage of the total loan amount.
Higher percentages mean you have to pay more money to the lender for borrowing that money.
On the other hand, when you save money in a bank account, the interest rate is the extra amount you earn on top of your savings. Banks will pay you a percentage of your total savings, usually at the end of the year.
Why have interest rates gone up?
In early May 2023, the Bank of England raised the interest rate to 4.5%. This change affects various rates in the UK, including those for loans, mortgages, and savings accounts.
The reason behind this decision is that inflation is currently too high, standing at around 10% while the national target is 2%.
Studies indicate that increasing interest rates is the most effective method to decrease inflation. As a result, many individuals will experience higher borrowing costs, and businesses may face increased loan rates.
Unfortunately, this situation poses additional challenges for people, particularly given the already elevated expenses for energy and food.
How will interest rate rises affect me?
If you have a loan or mortgage with a variable interest rate, the amount you need to pay back may increase.
However, if you have a fixed interest rate, your payments will remain the same until the fixed period ends.
It's crucial to understand how changes in interest rates can affect your ability to make payments.
To get an idea of how your monthly payments might be impacted, you can use a mortgage calculator.
Do higher interest rates help decrease inflation?
When interest rates are high, it costs more for people to borrow money, so they are motivated to save instead. This leads to reduced spending by people in general.
When overall spending decreases, the prices of goods and services tend to increase at a slower pace. This slower increase in prices results in a lower inflation rate.
How will Interest Rates Affect Mortgages in Doncaster?
Higher interest rates can have a considerable impact on mortgages in Doncaster.
When interest rates rise, it becomes more expensive for individuals to borrow money for purchasing a home or remortgaging their existing mortgage.
Higher interest rates lead to increased monthly mortgage payments, making it more challenging for potential buyers to afford a home and potentially reducing their purchasing power.
Additionally, higher interest rates can deter homeowners from remortgaging their mortgages, as the cost of borrowing becomes less favourable.
Contact Us Today
Share this post: