The rise in interest rates – How does it affect my car finance?

By: Alice Nicolson

Interest rates. Some of you will know exactly what I’m talking about and what it means for the economy and your pocket. For others, it might be something a little more elusive.

On November 2nd, 2017, The Bank of England raised the base interest rate by 0.25% to 0.5%. This is the first increase since 2007. But what does that mean?

The Bank of England’s Interest rate rise: What does it mean?

The base interest rate is set by a central bank, in this case, the Bank of England. In short, it’s the amount of money the bank will charge to lend money to commercial banks, like Natwest or Santander. When the Bank of England charges the banks more, the banks have to charge us more when we borrow money to make up the difference.

To those of you who have bad credit car finance, this can all sound a bit scary! But don’t worry, I’m here to help you understand what the interest rise means to you and how we can help you to save money.

So, what does it mean for your car finance deal? Is it all doom and gloom?

Interest rate rise for cars on finance

How an interest rate affects you depends on the circumstance. For example, when you have a savings account like an ISA, the interest is the percentage of money the bank will pay into your account on top of the amount you’ve saved. So, if you have an ISA with an interest rate of 1% and you put £10 into it, the bank would give you 10p interest. Basically, when you’re saving money the higher the interest rate the better.

However, when it comes to borrowing money, it’s the opposite. In the case of a car finance, the interest rate is the percentage of the money you pay on top of the amount you’ve borrowed from the finance company. So, if the interest rate rises, you have to pay more on top of your monthly repayments. This is even more worrying if you have bad credit.

At the time of writing this article, none of our car finance providers have given any indication of a rate increase. Stoneacre Financial Services, a company who offer a bad credit car finance, are geared up for 2018, offering a wide range of new products and services. They even aim to release their tier zero car finance product, which offers lower interest rates to customers who are considered ‘near prime’.

Despite the predictions, there’s always an up to every down! If you were thinking of getting a car on finance, now is a good time to beat the interest increase. Purchase or upgrade your vehicle before the bank’s act. For more information on Stoneacre bad credit finance, click here. Or if you’re lucky enough to have a good credit rating, check out our range of finance deals! Interest rate rise for the economy as a whole

So, what does the base interest rate rise mean for other areas of your life?

- Reported higher interest rates encourage individuals and families to save more. If you want to get ahead of the game, it might be time to start putting money away for a rainy day.

- A higher interest rate also gives foreign investors an incentive to put their money in UK banks, as they earn more interest. The hopes are this will help to increase the value for the pound, which is good news for us all economically.  If you’re not sure, a stronger pound means the cars are cheaper and it costs less to import them. The price of fuel could also drop, which means overall, motoring could get a lot cheaper, sounds good right?

A stronger pound results in cheaper imports, the purchase price for cars could fall, the cost of fuel could also fall as a result so overall motoring costs could be saved.

All this is, of course, subjective at this stage, but it’s good to be prepared for any economic changes. If you want to know more about bad credit car finance, Stoneacre deals or have any other enquiries, give us a call on 01405 744186.

Please note we record all our calls to ensure that we give you the service you deserve.