The 0.25% increase follows the decision of the Bank of England to increase its base rate by 0.25%.
Anne Gunther, chief executive of Standard Life Bank, said:
“It is important to put this rise in context. In mortgage terms, it does not mean misery for consumers. We expect the Bank of England base rate to go up to 5 or 5.5% by the end of 2004. When compared to base rates over the last 15 years, this figure is still at the lower end of the scale. Indeed, the last time the base rate was at 5% (from 2 August to 17 September 2001) homeowners regarded that figure as good. And lets not forget that for savers, a rise in interest rates will be welcomed.
“However, those consumers who should be worried by today’s news are those carrying a burden of expensive short-term debt. I think it is sensible to sort out our finances as quickly as possible by, for instance, remortgaging to a flexible mortgage at a cheaper interest rate. This allows homeowners to wipe out credit card debt or personal loans while at the same time saving money on regular monthly mortgage payments.
“As interest rates start to rise, flexible mortgages really come into their own. Flexible mortgages allow consumers to overpay, turning their mortgage into a great financial planning vehicle. By overpaying, they can cut years off their mortgage and save thousands of pounds in interest payments. And the beauty of flexible mortgages is that if they need to access that money they can easily reborrow, at a rate far cheaper than high street loans or credit cards.”
