The Bank of England announced last week that it is planning to raise interest rates in the UK again.
Faster wage growth expected this year has led the bank to consider another rise in the base interest rate, as wages are due to grow more quickly than prices.
The bank said on Thursday: ‘With a strengthening world economy and more people in work, the UK economy now needs a little less support from us. We raised interest rates in November from 0.25 per cent to 0.5 per cent. If the economy continues to perform as expected, we think we will need to raise them further.’
The general consensus from financial experts is that the next rise will happen in May this year.
With higher interest rates leading to more expensive borrowing, consumers might want to try and lock in the best rates available at the moment.
Moneyhub chief executive Samantha Seaton said: ‘A potential interest rate rise in the coming months will have an impact on anyone with a mortgage, loan or credit card, particularly those who are already finding it tricky to make ends meet.’
She continued: ‘If you haven’t already, those with mortgages or planning to buy may want to consider fixing their repayments while rates are still low. And for those paying interest on a credit card, it’s a good time to switch to an introductory 0 per cent offer.’
Those looking for a low mortgage rate may not have much time to lock it in.
The £100 billion Term Funding Scheme designed to make sure lenders passed on the last cut in interest rates is due to close on 28 February, so mortgage rates could start to creep up in anticipation of the expected base rate rise.
For those consumers looking to take out a new mortgage or switch mortgages, now may be the time to act.
One benefit to come from the potential base rate rise will be for travellers abroad. The value of the pound has already risen following the Bank’s announcement.
David Lamb, head of dealing at currency firm FEXCO Corporate Payments, said: ‘While the prospect of more expensive borrowing for homeowners will have a cooling effect on the UK economy, for now the Pound is making hay while the sun shines.’