Interest rates have been very stable over the last nine years. The interest rate set by the European Central Bank (ECB) have been set at zero for a number of years. This has been good news for homeowners as repayments have been low for a long time. But with interest rates set to rise in late 2019 this is going to have a impact on repayments. This will mean a rise in repayments. See the article in The Irish Independent How to protect yourself from looming threat of rate hikes for more details .
For many Irish Homeowners the stable interest rate has meant that mortgages have been stable and repayments are affordable. But with a increase in the interest rate what can you expect and how to cope with it.
The first thing that will happen is that your finances are going to change. Your repayments will rise gradually over a period of time. By the time the rates are stabilised you could see your payments rise hundreds of Euro, depending on the amount borrowed and term of loan.
What can you do to counteract this?
- Fix Your mortgage: This will mean that you will know how much your payments will be and will allow you to budget more easily.
- Overpay Your Mortgage: If you can afford it, pay off more of the capital of your loan. The lower the amount will mean less impact when rates rise.
- Avoid Loan top-ups: It would be tempting to borrow more when rates are low but this will have an impact as rates rise.
- Sort other loans: Clear as much of your unsecured borrowing as possible. Credit cards, overdrafts and personal loans will also be affected by interest rate hikes. Try clearing your loans and avoid new ones.
With the interest rate likely to happen late 2019 it is probably a good time to seek financial advice and have a review of your finances. This could limit the impact of an interest rate hike on your finances.