Homeowners should brace themselves for further interest rate rises
Homeowners in the UK have already had to cope with the financial strain of four interest rate rises of 0.25% each since August 2005. The Bank of England has been trying to bring inflation under control by raising the interest rates, and homeowners on variable rates were hit with rises in August 2006, November 2006, January 2007, and finally in May 2007. The interest rate has gone from 4.5 percent last August to 5.5 percent by this May as a result of these interest rate rises.
And following the release of the minutes from the latest Bank Of England's Monetary Policy Committee a number of analysts and economists are predicting that there could be another two interest rate rises on the cards by the time summer hits. The interest rate is now at its highest in six years, but some think that by the summer the rates will reach six percent. This could be through one interest rate rise of 0.5% or two rises of 0.25% each.
Figures show that someone with a £150,000 mortgage is paying around £1200 more a year as a result of these rises. If the rate rises to six percent, someone with this size mortgage would end up paying £150 more each month on their mortgage repayment. According to the minutes of the Monetary Policy Committee a 0.5% rise had been strongly considered for May, although the Bank of England did decide on another 0.25% rise in the end.
However, economists state that this means that further rises are probably on the way, and consumers with variable rate mortgage should brace themselves for yet further financial strains. Although inflation has now fallen from 3.1% to 2.8% the government target is 2%, which means that further rate rises are inevitable until inflation comes back under control, state some analysts.
External Links: