Brexit has raised many concerns with many people. A lack of household finance is one which many people will resonate with. Concerns over increases in prices, lack of jobs and raising interest rates could be some of the things that people are concerned about. Interest rate rises are a concern to any one that has a loan as if the Bank of England raise the Base Rate then lenders tend to raise their rates too. Anyone in a fixed rate deal will be spared, at least in the short term, but anyone with a variable rate loan or taking out a loan in the future could be impacted. It is wise not to panic though and consider both the chances of the rates rising as well as what to do if they do rise.
Will Interest Rates Rise?
This is the million-dollar question that people ask in many different circumstances and it can be very difficult to predict. Interest rates are controlled by the Bank of England who have set criteria on when they change them. Their main aim is to keep inflation around the 2% mark and if it moves significantly away from that percentage then they will adjust the rates accordingly. If inflation rises then they will raise rates to keep inflation down. Therefore, whether rates rise will depend on whether prices go up. The predictions have been that if we leave with no deal then we will have to pay more import duty on many things particularly those from the EU until we negotiate a trade deal, which implies prices will go up. That is assuming that retailers add on the tax, which is usually the case. However, if we leave with a deal, then there will be a period of time for negotiating where it is likely that imports will not be taxed any differently. After this then imports could become dearer or cheaper depending on what deals we can negotiate. Of course, there are some people also still hanging on to the hope that we will not leave at all.
Uncertainty can also be a big factor in the markets and this has an impact on prices in a less direct way. However, things have been uncertain for a long time now and so this is unlikely to have already had all of the impact that it is going to have. It is therefore likely that this will not impact prices.
Of course, there may also be other world or UK events that happen at the same time as Brexit would could lead to a change in prices, which may have more of an impact, but it is impossible to predict what that might be. Therefore, there can never be any certainty about what might happen.
How to Protect Against Rate Rises
There are a number of things that you can do to protect yourself against rate rises. It is wise to put some into action now, if you can and have some ready in case you need them. For example, make sure that you do not have a loan that is more expensive than necessary. Swap to a cheaper lender if there is one available to swap to without too high an admin charge. It is also wise to put aside some money as savings so that you have something to fall back on if you are struggling to cope in the future. Also note down some ideas about where you might be able to reduce your spending or how you might be able to make more money. Then, if rates do rise, you can look at the notes and do some of the things you have listed there. It can also be really wise to overpay your loan if you can. This means repaying more than necessary so that you owe less money. This will mean that when you are charged interest, there will be less money to charge the interest on and therefore you will be paying back less. You may even be able to repay the loan in full before any interest rises occur. There are many things that you can do to protect yourself against rate rises. However, whether these happen as a result of Brexit or just happen anyway, it is likely, that if you have a long-term loan that at some point, you will see a raise in rates. It is therefore really important to make sure that you are prepared for this. When you take out the loan, you should ideally be imaging how much you might have to be paying for repayments if the rate is significantly higher and whether you will be able to afford that. If you already have the loan, do that now and think about how you will manage and whether there are any changes that you can make now that will help you to plan for that.