Despite not being a member of the euro, the UK is continuing to feel the negative effects of the ongoing problems in the Eurozone. Millions of mortgage borrowers in the UK are set to see interest rates rise after four of the country's major banks were downgraded by a leading credit ratings agency.
Moody's decision to downgrade Barclays, HSBC, Royal Bank of Scotland and Lloyds Banking Group is set to result in a rise in their borrowing costs. Experts believe that this will, in turn, result in higher rates for millions of mortgage customers.
Credit ratings agency Moody's has recently downgraded 15 of the world's biggest banks and financial institutions including four of the UK's biggest lenders. The Daily Mail reports that the move "reflects Moody's growing pessimism over the credit-worthiness of banks across the world".
Gary Greenwood from analyst Shore Capital said: "The UK banks are in a stronger position than their European counterparts - their liquidity and capital conditions are arguably better, but this proves that they cannot escape the problems in the eurozone."
The credit downgrade means these banks could be forced to pay billions of pounds extra to raise funds. This, in turn, is likely to push up rates on loans and mortgages for households and small businesses in the UK.
Keith Osborne from whathouse.co.uk says: "We have already seen some lenders raise their mortgage rates and this credit downgrade can only make the situation worse for borrowers. As banks find it more expensive to raise funds they are likely to pass this cost onto borrowers in the form of higher mortgage rates."
A million borrowers in the UK have already seen their mortgage rate rise over recent weeks. The likes of Halifax and the Co-operative Bank have already raised their standard variable rate and these increases will result in borrowers paying an additional £300 million in interest payments this year. And further rate rises will only make this situation worse.
If you're concerned about potential interest rate rises, one option is to consider a remortgage. There are lots of remortgage deals in the market, particularly if you have a reasonable amount of equity in your home and lenders will often meet many of the costs associated with switching your mortgage.
Osborne adds: "When considering a remortgage it may be wise to consider a fixed rate deal. This will provide the security of knowing exactly what your mortgage repayments will be for a set period. And it also protects you against any potential interest rate rises which may occur as a result of this credit rating downgrade. However, borrowers should move quickly as it's only a matter of time before banks pass on these increased costs to borrowers in the form of higher fixed and variable rates."