UK Homeowners Fear Base Rate Rise

 

Many homeowners in the UK are worried that the Bank of England interest rate will shortly start to rise and put further pressure on household and personal finances.

According to a survey conducted by moneysupermarket.com, 27% of people expressed concern about an increase in the base rate. The Bank of England's Monetary Policy Committee has kept the rate at 0.5 per cent for nearly a year and a half. This has been good news for many homeowners and provided them with a long period of stability in their mortgage payments. However, a rise in the base rate, which is sure to come, would mean for many a potentially significant increase in the level of repayments.

For example, should the base rate increase by 1%, a person with an interest-only mortgage of £150,000 on a 2.5 per cent standard variable rate would see their monthly charges rise by £125.00. A rise to 5% (the level in October 2008) would result in an extra cost of £562.50 per month.

Kevin Mountford, head of banking at moneysupermarket.com, reflected: "Whilst it is expected that the Base Rate will creep up slowly, consumers need to understand the effect this will have on their finances and plan accordingl."

 

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