Tuesday, January 18, 2011

Mortgage Worries

It probably is silly to be worrying about base rates at the moment, but the other day a newspaper predicted that the base rates may start to rise in the summer. For anyone trying to survive on the interest on their saving this is great news, but for me it is not. I have a fantastic mortgage at the moment which is just 0.46% above the base rate and is a tracker. This means that I am paying just £81.50 a month mortgage interest at the moment which is pretty amazing. However, last time conservatives were in, the base rate went up to 15%. If this happened my interest payments would go up to £1222. A scary thought as we only have about £700 a month left over at the moment , most of which we invest to pay off the mortgage debt. I woudl love to pay the mortgage off before the interest rates went too high but as we only have about 45% of it put away, that is unlikely. We also need new furniture, want a loft conversion and new flooring through out the house and so, depending on how we prioritise we may end up taking some time to pay it off. At the moment we could pay off £6000 a year quite easily but that woudl still take us over 9 years to pay it back and every time the interest rate was increased, we would have less money to invest. At the moment I am just hoping for a big premium bonds win, but I really need to have a better plan in place.

1 comment:

the credit cruncher said...

There is the advantage that, as you pay it off, the interest payments drop - we have already seen this taking effect on our mortgage.
I am equally concerned as we have a similar mortgage, but I don't think there is much danger of interest going over about 3 to 5% for the next few years - no guarantees, but the bank of England only want to bring the rate back to 'normal' levels apparently - and the base rate is set by the Bank of England.