Are you ready for an interest rate rise?

People are being warned to brace themselves for an interest rate rise.
People are being warned to brace themselves for an interest rate rise.

On Thursday 2 November, for the first time in a decade, at the Bank of England meeting it’s predicted to vote to increase interest rates.

If you’ve credit card, mortgage debt, or savings the sooner you act to protect yourself the better.

The source of the prediction is unimpeachable - Bank of England governor Mark Carney, who said: “In the relatively near-term we can expect interest rates would increase somewhat.”

Combine this with the fact inflation is at a five-year high, and while nowt’s certain a rise from 0.25% to probably 0.5% looks on the cards.

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. Those on fixes won’t see any change until their deal ends.

Yet for those on variable or tracker mortgages a 0.25% rise means roughly £200 a year more per £100,000 of outstanding mortgage.

Worse, many, especially those on lenders’ standard rates, are already massively overpaying.

And while mortgages are currently at all-time lows, a rate rise will likely signal the beginning of the end of that.

So check now if you can save…

* Take 2 minutes to benchmark the best possible deal. My mortgage best buys comparison HERE includes all deals available to brokers, and direct only deals.

- Finding a cheap deal isn’t enough - you need to get accepted. Your credit history is a huge part of whether you’ll be accepted for any type of credit, including a mortgage.

My free www.mse.me/creditclub shows your score, gives you access to your Experian credit file, and has tips for how to boost it and www.clearscore.com will show you your Equifax file.

It’s not just about credit score though. Lenders also do affordability tests. These stress test affordability if rates were 6% or 7%.

A good mortgage broker can help match your circumstances to deals that will accept you – as they’ve information that isn’t available to the public.

To find a local broker ask friends for recommendations or use www.unbiased.co.uk or www.vouchedfor.co.uk to find one.

Alternatively some phone-only brokers such as www.landc.co.uk are fee-free.

2. SAVERS: Rate rises are good news, but consider giving yourself the flexibility to move.

Low interest rates have punished savers, especially older people who 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.

Check your savings rates, if it’s less than 1%, it’s a rip off, move it. For updated full best buys see www.mse.me/top-savings, though in brief, at the time of writing…

The www.postoffice.co.uk online account pays 1.27% AER and it’s easy access, so you can withdraw money whenever you want, Though the fully UK regulated www.bankofcyprus.co.uk pays 1p more per £100 saved at 1.28%.

If you’re prepared to lock cash away without access you can earn more. App-based www.atombank.co.uk pays 1.8% for 1 year or 2% for 2 years.

If your money’s in a poor-paying account now, just get it sorted while it’s on your mind. Yet if you’re a regular switcher, fixing today may be premature if rates are about to rise - and fixing longer is riskier if we see rates continue to move up after that.

So it’s worth considering staying easy-access for short term flexibility, then fixing in a few weeks.

3. EXISTING CREDIT CARD DEBT: 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 you can do a balance transfer – where you shift it to a new card, with a cheaper interest rate.

Of course for most with ongoing debt the challenge is being accepted.

My balance transfer eligibility calculator at www.mse.me/BTeligibilitycalc shows which 0% deal you’re most likely to get.

Of course, with credit card APRs already often over 18%, a 0.25% rise won’t make much odds.

Yet after years of ever better ‘best ever’ 0% deals, things are now moving the other way, due to warnings about irresponsible lending, and a rate rise would add to that mood music.

So I’d act quickly. If you do a balance transfer, as always follow the golden rules:

a) Clear the card or transfer again before 0% ends or you pay the APR.

b) Never miss the minimum monthly repayment, or you can lose the 0%.

c) You must usually do the balance transfer within 60/90 days.

* Martin Lewis is the Founder and Chair of MoneySavingExpert.com. To join the 12 million people who get his free Money Tips weekly email, go to www.moneysavingexpert.com/latesttip