What Does The Rise In Interest Rates Mean For Me? 

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Global interest rates are rising after the historic all-time low of the last few years. The rate of inflation has been soaring, the highest it has been in 30 years, partly due to the volatile global situation but also due to ongoing supply chain issues and severe labor shortages. In an effort to slow down soaring inflation and keep economies stable, banking authorities worldwide have started to increase interest rates steadily. Keep reading to see how the rising interest rates will impact your day-to-day life, including your finances. 

Mortgage Interest Rates

Mortgage Interest Rates

With many taking advantage of the rock bottom interest rates, the property market has been bombing over the past two years. However, in an effort to combat the inflation crisis, interest rates have already started to rise, as has been highly anticipated. If you currently have a variable mortgage, you will begin to see a change in your monthly repayment, even if the increase is slight for the time being. If you have a fixed-rate mortgage, you won’t see the effects of the interest rate hikes until the end of your fixed term period.

The booming property market has proved a little frustrating for those looking to get on the property ladder, as the imbalance between lack of supply and high demand has led to massive competition for properties. So far, the increase in interest rates has been minimal, meaning mortgages are still affordable for the time being. The higher interest rates will most likely have the knock-on effect of a more stable property market, giving those looking to get a foot on the property ladder a chance.

To get a realistic idea of what you can afford based on the current market rates, you should first secure a mortgage in principle. Trussle recently launched a new mortgage in principle service that checks your eligibility with numerous lenders with the best interest rate. A mortgage in principle is a soft credit check, meaning your credit score remains unaffected. As the economic situation, including rocketing energy costs, is changing rapidly, we are yet to see the long-term impact on the property market. Still, it is not all bad, with possible positive knock-on effects such as a cooling-off of house prices.

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Credit Cards And Debt 

Credit Cards And Debt 

Many of the everyday items consumers often pay for with a credit card have all increased by around 7% in the last year. Meaning people are finding themselves in hot water with credit card debts faster. Understandably, there is a degree of panic with news of interest rates hikes, but there is no need to stress just yet, as these increases are set to be methodical and gradual, giving consumers a chance to prepare.  

Now is the time to review your finances, including any debt and how much interest you are paying on credit cards each month. Whatever type of debt you have, including student loans or a car loan, the rule is to start with the debt with the highest interest rate first. Try to pay these down as soon as possible before interest rates increase further, which are predicted to rise over the next year gradually. Run a credit report with Experian to get the most accurate picture of your finances.

Cost Of Living

Cost Of Living

The Consumer Price Index (CPI), which quantifies inflation, showed that prices are up by more than 8% in the United States and around 7% in India and the Eurozone from the previous year. The increases are primarily due to significant gas price increases recently. Inflation is set to increase further over the coming months, impacting nearly every aspect of day-to-day expenses, including food and beverage prices, eating out, and clothing. Unfortunately, wages are not keeping up with the pace of these price increases, meaning most of us will feel the pressure on our finances in the coming months. 

Besides examining your budget and making necessary changes to adjust for increased prices, it is also good to start shopping around for essential household items and stocking up. There is no need to ransack your local supermarket or start panic buying, but when it’s done right, bulk buying can help offset the rising prices.

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Savings Potential

Savings Potential

The low-interest rates of the last few years have also meant significantly reduced savings rates, and this is also set to reverse as interest rates increase. One bank may adjust savings rates faster than another, so shop around to find the best savings rates on the market. Often, signing up with online banking gives you an opportunity to scope out the best savings rates. Although the increase in savings potential may be minimal and slow, keep in mind the most significant benefit may not be seen in massive savings but rather in proving a track record of savings. Establishing a consistent habit of saving will positively impact how much you can borrow in the future. 

Vansh Sharma
Vansh Sharma
Graduate in Journalism and Mass Media. For me, writing is a free flow of thoughts and opinions that brings reality in a formative way. I am a keen observer of society and nature, hence my writing shares a dramatic arch with deep rationale. Writing and reading make me think deeper and help me draw a contrast to understand better. I have written research papers and am on the verge to complete more. You can walk with me from Cinema, lifestyle & everyday speculations to technology, health, and education.

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