First time buyers could be hit again with another interest rate rise
The rise in the Bank of England interest rates, as announced last week, could end up making things even harder for first time buyers, as well as leaving many mortgage payers with huge mortgage loans struggling to meet rising repayments following the expensive Christmas and New Year period. The Bank of England has announced yet another quarter of a percent rise in interest rates in the UK, taking the rate to five and a quarter percent.
The rise in interest rates has not come as a total shock to most people, as many analysts had already predicted another interest rate hike early on in 2007. However, the Bank of England surprised many by hiking up the interest rate shortly after New Year, rather than in February when most though that the rates would rise. This has sparked fears that we may see yet another interest rate hike in the first quarter of the year, and in total interest rates are expected to rise by up to another half a percent this year.
The interest rate now stands at five and a quarter percent, and with house prices in the UK still extortionate despite prediction of stabilizing this could make things very difficult for first time buyers in the UK. Not only will first time buyers have to take out a really large loan in order to consider purchasing a property due to the high property values, but they will now have to pay higher rates of interest on the loan that they take.
Although first time buyers could look at taking a fixed rate mortgage in order to avoid being hit with any further rate rises, the fixed rate is set slightly higher than the base rate, and therefore those taking out a fixed rate mortgage will still have to deal with the latest interest rate hike. However, it does mean that if there is another interest rate rise in February or March those with the fixed rate won’t need to worry about being hit.
External Links: