The UK's base rate of interest has been frozen at a historic low of 0.5 per cent since March 2009, having been brought down swiftly from 4.5 per cent the previous year in an attempt to stimulate growth in the British economy and avoid a prolonged financial crisis. However, with markets around the world showing firmer signs of recovery following the global economic downturn, there are now fears that an increase in interest rates could hit businesses and consumers hard.
On July 10, the Bank of England announced that it was to continue with its current fiscal strategy and keep interest rates at 0.5 per cent. An increase has been postponed for another few weeks at least, but there is growing awareness that a rise is indeed imminent. Bank of England governor Mark Carney suggested in June that rates could start to rise before the end of the year as the British economy moves on to a more stable footing.
The governor was keen to stress that any increase in rates would be "gradual and limited", suggesting a "new normal" of 2.5 per cent could be reached by 2017. Experts have suggested that increases of 0.25 per cent are likely. The Bank of England is keen to ensure that any increase in rates does not have an adverse effect on the economic recovery, but even small increases could potentially hurt consumers. According to data released by the Office for Budget Responsibility (OBR), an increase in the base rate of interest of 2.5 per cent could lead to a couple with a repayment mortgage of £150,000 having to find an additional £230 every month in order to meet their repayments.
For consumers, keeping an eye on their credit history by making use of a free credit report makes more sense than ever. When interest rates rise, this will have an impact on borrowing rates and as a result, those with a better credit score will be in a far better position to take advantage of the most competitive offers.
There are a number of benefits to consumers of not only remaining aware of their current credit score, but actively checking their credit report to ensure there are no anomalies that could adversely affect their ability to access cheap credit. Many people will only think about their score once they have had an application for credit turned down, but the sensible option is to make use of a free credit report on a regular basis. This way there is every opportunity to spot mistakes before they have an impact.
Missing information, incorrect addresses and incorrect details of previous loans can all have an impact on how people are scored. Addressing any errors and providing additional details where necessary can therefore help to improve the overall rating and in turn, increase the chances of being offered a competitive interest rate.
Anyone wanting to get an up-to-date credit check, can go here to find out where they stand by clicking here.