UK interest rates likely to rise in 2 weeks

PROTECT YOURSELF BEFORE IT HAPPENS
- Shift costly credit card debt before 0% periods shorten
- Mortgage costs likely to rise, unless you beat it
- Good news for savers, but beware locking in

The Bank of England meets 8 times a year to decide what happens to UK interest rates. Next time, on Thu 2 Nov, it's likely to make financial history, if as is predicted, for the first time in over a decade, it votes to increase UK interest rates from 0.25% to probably 0.5%. And this is perhaps just the start.

After all, recently we've lived in non-normal times. Our interest rates are an anomaly, limboing way below historic norms. To put it in context, the last time rates went up, in July 2007, they increased from 5.5% to 5.75%.

The source of the prediction is unimpeachable - Bank of England governor Mark Carney himself, who said: "In the relatively near-term we can expect interest rates would increase somewhat... and increases, when and if they come, will be to a limited extent."

Yet nowt's certain. Its committee must vote and things can change rapidly. However, yesterday's inflation rise to 3%, well above the bank's 2% target, makes it more likely. Increasing interest rates discourages spending, and encourages saving, cooling the economy, which helps squash inflation.

So I wanted to give you enough time to take key actions now in case it happens (and even if it doesn't, most of this is good to do anyway)... 

1. MORTGAGE HOLDERS: Check immediately if you're on the best possible deal. If not, you may be able to save £1,000s.

Those on fixes won't see any change, unless their deal ends soon. Yet if you're on a variable or tracker mortgage and interest rates increase, your mortgage will get more expensive. A 0.25 percentage point rise is roughly £200 a year more per £100,000 of outstanding mortgage. Worse, many, especially those on lenders' standard variable rates, are already massively overpaying.

As @MatthewOgram tweeted: "@MartinSLewis Used your remortgage guide to swap products. 5.49% down to 2.10% 5yr fixed. £230-per-month saving. Thanks muchly." That's nearly £14,000 saved over the 5 years. 

The bigger picture is this could be the beginning of the end of very cheap mortgages. New fixes are already a tad costlier as the market's anticipated rate rises; yet for now deals are still incredibly cheap - with 2-year fixes starting from as little as 1.1%.

So everyone, check ASAP if you can save. There's full help in my Remortgage Guide, yet here's a quick action plan...

a) Dig out your current mortgage's details: Find the rate, if it's fixed or variable, when the intro deal ends, what the mortgage term is, if there are early exit penalties, and crucially work out your CURRENT Loan To Value - the proportion of your property's value you're borrowing.

b) Take 2 mins to benchmark the best possible deal: Our Mortgage Best-Buy Comparison includes all deals available to brokers, and direct-only deals. And we've designed a clever extra where it factors the fees into the overall cost to give a true comparison.

c) See your likely saving: Once you know prospective new deals, use our Ultimate Mortgage Calc which has lots of tools to show your saving.

d) Finding a cheap deal isn't enough - you need to get accepted: The days when lenders would fling out deals to all and sundry are long gone...

• Is your credit score good enough? Your credit history is a huge part of whether you'll be accepted for any type of credit, including a mortgage. Our free Credit Club shows your score, gives you access to your credit report, and has tips on how to boost it.
  
  
• Are the repayments affordable? Lenders won't just check if you can afford the monthly repayments at the current rate, but they'll also stress-test affordability if rates were 6% or 7%.
  
  The details of each lender's eligibility criteria aren't available to the public, but they are to mortgage brokers, so they can help match you to the top deal you'll be accepted for. See Top mortgage brokers for info.

2. SAVERS: Rate rises are good news, but consider giving yourself the flexibility to move - eg, Post Office 1.27% easy access. 

Low interest rates have punished savers, especially older people who'd worked and saved hard and planned to live off the interest. So a rate rise is positive. In fact, savings rates have already risen, as the market's taken note of the general direction of travel of interest rates. 

If you've savings, check now what rate you get. Less than 1%? It's a rip-off - move it. Full info including top current account saving rates in Top Savings. Here's a brief rundown of best-buy normal savings accounts...

- Up to 1.3% easy access: Here you can withdraw cash whenever you want. After years of people complaining to me they've never heard of the top payers, there's a big name up there. The Post Office online acc (min £1) pays 1.27% AER variable; Bank of Cyprus UK (min £1) pays 1p more per £100 saved, at 1.28% AER variable.

You may have seen RCI Bank at 1.3% AER variable, but unlike the others this ISN'T UK-protected so you don't get the usual £85,000 UK savings safety protection - you're reliant on the French scheme.

- Top fixes up to 2.2%: If you are prepared to lock cash away without access you can earn more. App-based Atom Bank pays 1.8% for 1 year or 2.05% for 2 years or NS&I pays 2.2% for 3 years.

If your money's in a crap account now, get it sorted while it's on your mind. For regular savings switchers though, getting a fix today may be premature if rates rise in a fortnight. So it's worth considering staying easy access for short-term flexibility, then fixing in a few weeks. And even then be wary of locking in for too long (eg, 2+ years) , in case rates continue to rise after.

3. EXISTING CREDIT CARD DEBT: The top debt-shifting 0% deals are already worsening. If you pay interest, check NOW if you can cut it. 

I'd push anyone who pays interest on existing credit card debt to urgently check if they can shift it to a new card, with a cheaper interest rate. Of course for most with ongoing debt the challenge is being accepted.

So use our Balance Transfer 0% Eligibility Calc which shows which 0% deal you're most likely to get. As Kelly told us: "Legend. Used the eligibility calc, got 35mths 0% and shifted £11,000 from 29.9%. Shocked by the savings." 

Of course, with credit card APRs already often over 18%, even if they were to rise by 0.25 percentage points, it won't make much odds. Yet after years of ever better 'best ever' 0% deals, things are now moving the other way. The Bank of England has warned about irresponsible lending and a rate rise would add to that mood music.

Six months ago you could shift debt to 43mths at 0%. Now it's shorter, so if you're paying interest, I'd sort it ASAP, as it's possible deals will continue to get worse. Here are today's best buys - always go for the card with the lowest fee, in the time you're sure you can repay.

 - Longest 0%: MBNA* up to 39mths, 1.99% fee (20.9% rep APR after).
- Longest 'non up to' 0%: Virgin* 39mths, 2.4% fee (20.9% rep APR after).
- Longest NO FEE 0%: Halifax* up to 29mths (18.9% rep APR after).
- Longest 'non up to' NO FEE 0%: Sainsbury's Bank* 28mths 0%. It does charge a 1.5% fee, but then refunds it within 60 days (18.9% rep APR after).

If you do a balance transfer, as always follow the golden rules:

a) Clear the card or transfer again before the 0% ends or you pay the APR.
b) Never miss the min monthly repayment or you can lose the 0%.
c) Don't spend/withdraw cash. It usually isn't at the cheap rate.
d) You must usually do the balance transfer within 60/90 days. 

4. PERSONAL LOANS: Rates very likely to rise, as currently at all-time lows.

If you've got an existing loan, it's almost certainly a fixed rate, meaning a UK rate rise won't impact it. Though for those hoping to get a loan, rates are very likely to rise from current all-time lows, both if there's an interest rate rise, and due to pressure on lenders to reduce the UK's personal borrowing.

So if you NEED to borrow it's sensible to do it quickly. Yet only do it if it's planned, budgeted for and affordable, otherwise the pain will likely outweigh the gain.

To find your cheapest loan, use our Top Loans Quick Eligibility Calc and it'll tell you which you've the best chance of getting, without hitting your creditworthiness. Here are v. quick best buys; full help and info in Cheap Loans...

- £7,500 to £15,000 loans: Sainsbury's Bank* is 2.7% rep APR (Nectar custs, 1-3yrs), Zopa* is 2.8% rep APR.
- £5,000 to £7,499 loans: Admiral* is 3.2% rep APR, Clydesdale* 3.3% rep APR.
- Under £5,000 loans: Zopa* is 5%-9.9% rep APR, Hitachi* 7.3%-7.9% rep APR. Yet for smaller amounts credit card 0% loans are often cheaper.

Sadly all loans these days are 'rep APR' which means only 51% of accepted applicants need be given the advertised rate. 

Of course, we'll keep you up to date with what you should be doing. And if rates do go up, expect a special email on the day with help.