If you do not currently have a mortgage, you may think that rises in interest rates are not something that you need to pay attention to – however this type of activity can have a knock-on effect in other areas, as cited in this article. Any kind of debt repayments can be affected by a rise in interest rates, and in the event of individual financial difficulties, this can show up as an adverse entry when lenders carry out a credit check (http://www.creditexpert.co.uk/experian-credit-check.aspx). Gathering this type of information about your personal circumstances will show you exactly the same information that is available to lenders, and a number of modern decisions are based upon your credit score – it is used for lending, new bank accounts, mobile phone contracts and many more everyday activities.
For those people that are already making mortgage repayments, you may already be aware of how a seemingly small change in interest rates can have a significant effect on your monthly repayments. The biggest pressure today is that it is often the case that interest rate rises do not correspond with a similar increase in your regular income, and this means that the extra payment will need to be taken from another area of your household budget. Juggling all of these finances needs to carried out with a great deal of care, as any missed payments will at the very least leave a negative credit mark that will show up when a credit check is carried out.
When looking to the future predictions for interest rate rises, the Office for Budget Responsibility (OBR) forecasts make potentially grim reading for any homeowner. They believe that within three years, repayments on a £150,000 mortgage will increase by almost £250 per month, and this prediction is based upon both past trends and future indicators. Prospective homebuyers may also feel the pinch of this, and passing the credit check for a mortgage could simply be the first step towards financial uncertainty. Property prices are currently increasing at a rate of 6.5% per year, and this is also a barrier for people that are trying to get on the property ladder.
In the event of a rise in interest rates, you may decide to try and shop around for a better mortgage deal, and even a small difference of 0.25% in the rate could release vital funds in your monthly budget. This is another situation where it is preferable to have a positive credit status, and brokers will usually be able to offer mortgages with lower rates to those that have a higher score. When a credit check is performed for you and any other joint applicant, any kind of negative payment behaviour on file could restrict you in your choice of lenders – it may therefore not be worthwhile to try and switch mortgage provider in this situation. All of this proves that even minor monthly bills need to be kept up to date, as more and more companies are now sharing your payment behaviour.
