So for 10 years we have enjoyed a record low Bank of England base rate, with some of the most competitive financial products ever seen, especially in the unsecured loans and credit cards market. However as of today the Bank of England has voted to raise the base rate from 0.25% to 0.50%, just ¼% rise, but what does it mean for you?
It depends I suppose if you are a borrower or a saver.
Savers can celebrate to a certain extent as the returns on savings should now increase accordingly. Savers have struggled for years to find a decent savings rate, indeed in July 2007 which was the last time the base rate rose the average saving account paid 4.05%, compared to todays 0.39%.
So whilst the rise in the base rate of interest should help push rates higher, it may be a waiting game. Charlotte Nelson, finance expert at moneyfacts explains; “Given it’s been such a long time since the market has seen a base rate rise, it is very difficult to tell whether providers will increase their rates straight away or decide to wait and see what the rest of the market does before making their move. Anyone looking for a savings deal now will need to keep on their toes and check the Best Buys to ensure they are still getting the best rate.”
What about borrowing? If you have either a secured loan or unsecured loan it is almost likely to be on a fixed rate so there will be no change. However for those wanting to borrow, then rates are inevitably going to rise so the time is now. Some lenders, when launching loan rates have a set amount that they will borrow at that rate, and once all this borrowing is ‘sold out’ then the rate will rise. Therefore there may be a number of days, even weeks before we see any rises.
For current best unsecured loans deals, Sainsburys Bank, at 2.7%APR representative for borrowing £7,500-£15,000 over 1-3 years with a nectar card. Yorkshire Bank/Clydesdale Bank are 3.3% representative APR for £5,000-£7,499, with under £5,000 coming in at 5%. Always remember to minimise the amount you borrow and repay as quickly as you can and always pay on time.