Homeowners Should Beware of Rate Increase Effect
With statistics showing most homeowner’s are unaware of what a change in interest rate will do to their mortgage, analysts are suggesting some research be done to ward off financial shortcomings. The base rate of 0.5 per cent has been steady for over a year now, but there is conflict over the rate remaining or increasing.
Last week Ernst & Young Item Club economists suggested leaving rates at low levels through the next few years until at least 2014. They stated this would be necessary to counter-balance Government’s spending cuts. However, other economists have warned of a looming inflation crisis in Britain. The Monetary Policy Committee brought up the possibility of a rate increase in their June meeting with a vote for a 0.25 per cent rise. The vote failed but MPC is watching for inflation increases which will signal a need for an increase. Experts warn homeowners to start preparing for an increase. Not preparing for "if" there is a rise but "when" the rate does increase. David Hollingsworth, of brokers London & Country Mortgages, said: "Borrowers should stress test their own monthly budget to see how big an increase they could tolerate if things do change."