When the Bank of England base rate goes up, it can create stress for borrowers. They may feel that they will be charged extra and they need to move to a cheaper lender and it may even be a cause for panic. It is worth considering changing lenders but you do need to be sure that you are doing the right thing and doing some checks to ensure you will be financially better off.
Beware of hidden costs
It is worth making sure that you are aware of any costs of switching lenders before you start. Firstly, check with your current lender to see if there are any costs of switching lenders. If you are tied in to a fixed rate, for example, you may find that the costs can be extremely high, perhaps thousands of pounds. This rate will vary between lenders and some may not charge at all. You do need to be sure that you are aware of the costs though. Consider this also with the new loan that you are looking at. They might have a charge for leaving and so if you want to switch again in the future this could be costly. There may also be costs for taking out a new loan. These costs could include admin fees for starting up an account and again, they will vary. You will need to look into these as well. Once you have this information you will need to calculate whether you think that the cost is worth it. It will depend on the difference in interest rate and how much you think that you will be able to save. If the difference is small then the costs may outweigh it but if the difference is large, then it might make it well worth paying the fee so that you can switch and start saving money.
Compare all lenders
You need to make sure that when you are looking at interest rates that you compare all lenders. Do not just look at an advertised rate in a building society window, on an online banner or in a newspaper and decide to go for it. It is important to make sure that you look at all lenders or at least a much bigger selection as although you might be switching to a cheaper rate, you may be missing out on even better deals. There are websites which will have information on the best deals and these can be worth looking at in order to decide whether you want to take advantage of one or not.
Consider how often to do it
It is also worth thinking about how often you want to compare interest rates. If you wait until the Bank of England changes their rate you may wait years or you may be looking every month. It is probably sensible to take a look every six months or year just to see how competitive your loan is. This will mean that you are not doing too much work but you are still likely to be able to find and take advantage of good rates. Doing it too often could be tiresome and if you keep switching it might have a negative effect on your credit report as lenders may not want to lend to you if they think that you will be switching quickly or they may see it as an indication that you are struggling with repayments so having to switch.
So it is really important to think about whether it is wise to switch when base rates change. When they rise, it is likely that many lenders will put up their rates and so the one that you are with will still be in the same position in the market. If you are keeping abreast with lenders and their rates, then you should already be with one that suits you and so it may not be necessary for you to switch at all. However, if you have not checked rates for a long time, then it could be a good opportunity to do so and to see whether you are paying more than necessary. Beware of switching too hastily though as you may have charges associated with moving away from and into different loans. Check out these fees and make sure that it is still worthwhile to switch. It can take some time and effort to do this research but it is worth it. If you switch without proper calculation, you could actually end up switching to a lender that will cost you more money and completely defeat the object of switching. So be cautious but do look into it as you could end up saving a significant amount of money. It is wise to keep regular checks on lenders and then you can see whether the rates you are paying are competitive.