On the 2nd August 2018, the Bank of England’s Monetary Policy Committee voted unanimously to raise interest rates from 0.5 to 0.75%. What will this mean to existing and future car finance agreements?
If you have already have a car finance agreement, the chances are that the rise in interest rates won’t affect you. Most car finance agreements are fixed rate, which means that the rate is agreed upon and fixed at the start so your monthly payment will not change. You can check this by referring to your finance agreement or if you financed with Magnitude just get in touch and we’ll be able to tell you.
If you took out a deal on a variable rate facility then you are likely to be affected. For those using a Balanced Payment scheme, your monthly payment will not change but at the end of the agreement (or if you settle early), any additional interest charges incurred will be credited to the loan. If you are a Magnitude customer, please feel free to get in touch if you have any questions and we can help with any queries.
When will rates go up and by how much?
It normally takes a few weeks for car finance providers to decide if they are going to raise their own interest rates, by how much, and when. With such a small rate rise, we believe that car finance rates will probably not be affected until the Bank of England raises interest rates again, potentially in 2019. If they do, as a finance broker we are able to advise on which lenders continue to offer the most competitive rates.
Future rate increases
Interest rates are predicted to rise slowly over the next three years. This will inevitably have an effect on the cost of car finance and all aspects of borrowing, so now is a great time to consider car finance if you want to benefit from historically low rates.
Fix in now
Do you want to fix in now? Magnitude has the ability to refinance agreements so not only can you change to a fixed rate agreement we may be able to get you a cheaper funding solution too. Get in touch to find out and let our team advise on the options.