Credit downgrade could trigger a mortgage rate rise.
A significant mortgage rate rise could well be the consequence of the potential downgrading of the UK's highly prized triple A credit rating.
It is warned that a credit rating downgrade could well cause the bank interest rate the Government pays to enable borrowing, to shoot up rapidly. Is if this happens, the danger is that increased costs will filter through to high street banks borrowing costs which will ultimately be passed on to mortgage borrowers by way of a hefty mortgage rate rise.
A week ago government debt was given a negative outlook by Moody's the credit ratings agency, this means there is now a 30 per cent chance that within the next 18 months, there will be a downgrade to the UK's credit rating. It is being warned that the Moody's downgrade threat will be a definite wake up call for all consumers.
A spokesman for Defaqto commented by saying that no one is actually certain what will happen regarding both the credit rating downgrade and it's impact upon personal finances. Consumers are being advised to pay off their debt and, those higher-rate taxpayers who have both savings and a mortgage are advised to consider an offset mortgage.
However it is not just a mortgage rate rise that consumers should be worrying about. A downgrade of UK debt will increase the government's borrowing costs which may lead to increased personal taxes as the Government tries bring in more money to cover the debts.
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