It’s been more than two years since the UK’s vote to leave the EU and we’re finally on the verge of securing a deal. However, with the risk of any deal Brexit still prevalent, there is still a lot of uncertainty over what impact it is going to have on the economy. One thing which may be affected according to the Bank of England is interest rates.
So, how might Brexit affect interest rates? Here, we’ll look at the potential impact it could have on the loan sector.
Interest rates could rise up to 4%
If a Brexit deal is struck, interest rates are reportedly likely to drop, or at least remain the same. However, if a no-deal Brexit goes ahead, the Bank of England has warned that interest rates could increase up to 4%.Considering the interest rate is currently frozen at 0.75%, that shows a huge rise which could prove problematic across the loans sector.
To put it into perspective, homeowners with a 25-year mortgage for £200,000, would see an increase in their monthly repayments of £300 if the rates were to increase to 3%. So, in essence, a no-deal Brexit could have dire consequences on the UK’s economy.
Loans could become more expensive and harder to get
It isn’t just mortgages which could see a huge hike in interest. The personal and business loans sector could also take a hit. It’s likely they will become much more expensive to take out and actually getting a loan in the first place is set to become harder, as well as riskier.
It will of course depend upon the outcome, but there is a chance loan interest rates could rise significantly after Brexit.
Borrowers advised to act now
While we are still awaiting the result of whether or not the recently agreed Brexit deal will go ahead, borrowers are advised to take action now. Those with a mortgage may want to look into switching to a fixed rate deal
Overall, how exactly Brexit will impact interest rates isn’t known. However, if a no-deal Brexit goes ahead, it could spell disaster, not just for loan interest rates, but for the entire UK economy.