Interest Rates And Repossessions Are Up!

Interest rates have risen again, along with the number of repossessed houses, but it's not all bad news! Read how to make the most of it.

As I was researching an increase in home repossessions this morning, the news came in that the Bank of England base rate had gone up by another quarter point, to the surprise of most economic forecasters. This does not bode well for thousands of homeowners on the brink of financial collapse.The Bank of England has increased rates three times in five months. The move from 4.5% to 5.25% now adds about £60 per month to the cost of a £100,000 interest-only mortgage, or more than £700 per year! This comes on top of a 3.9% increase to inflation (according to the Retail Prices Index measure).It is not a coincidence, then, that the UK is experiencing rising bad debts. Sadly, there have been more repossessions over the past few years too. Data from The Council of Mortgage Lenders shows that there were 3,000 properties repossessed in the last six months of 2004, but in the first half of 2006 they were up 270% to 8,140. When data for the second half of 2006 arrives, I suspect the number will be significantly greater still, due to a nationwide debt habit and the rises in rates.Even so, the percentage of mortgaged properties that have been repossessed is not obscene, at just 0.07% in the first half of 2006. Compare this with 0.4% in the second half of 1992, which is almost 40,000 properties, and it doesn't seem so bad.Repossessions from 2nd half 2004 to 1st half 2006PeriodMortgagesoutstandingNo. of repossesedproperties% of repossessedpropertiesH2 200411,512,0003,0000.03H1 200511,545,0004,6200.04H2 200511,596,0005,6900.05H1 200611,650,0008,1400.07Data from the Council of Mortgage LendersAlso, what's moderately bad news for debtors is good news for savers! We need to keep an eye on our savings accounts, to ensure that the rate goes up and to see if we're still getting a competitive interest rate. The best easy-access savings accounts should be approaching 6% by the end of this month.You'll want to keep an eye on the savings centre to see which accounts behave properly by increasing their rate. Also, you'll be able to read about savings-account rate changes, as we'll keep you informed.Back again to debtors. Every homeowner paying the mortgage company's standard variable rate should now look around for a better deal (perhaps with a fixed-rate in case the Bank gets trigger happy). Consider that your mortgage will now have jumped three times since last August. Besides, you should never just sit on these standard rates, because the cost to you by the end of the mortgage could easily add up to an extra five-figure sum! I urge you to compare mortgages and to consult The Fool's award-winning mortgage service for free help selecting from over 8,000 products.We can all save more money, or reduce our debts further. One of the simplest ways is to compare utilities prices and switch, which could save you £100 or so. (Read more in Are Gas And Electricity Comparisons Accurate?)By taking advantage of just these two measures, most debtors could easily counter all of the recent interest rate rises, and savers will have even more money to stash away.> Read some money-saving tips in Save Money By Being Green!> No mortgage? Reduce the cost of your debt with a cheaper personal loan or credit card.