The Inside Edge
A QUARTER of British homeowners are worried about Bank of England base rates going up, after an 18 month period of 0.5 per cent rates, according to research from Moneysupermarket.com
The Bank of England’s Monetary Policy Committee is expected to hold base rate at 0.5 per cent at their monthly meeting in just over a week’s time, marking more than 18 months of no change.
At their September meeting, eight members of the Committee voted to keep the base rate at 0.5 per cent, but Andrew Sentance voted against, preferring an increase in Bank Rate of 25 basis points.
Interest rates will have to start rising at some point and the research found that one in four people are worried about the impact this would have on their finances.
Here’s an infographic with some key figures:
As you can see – with the argument is taken to its conclusion i.e. if base rates were to return to pre-credit-crunch levels, average monthly payments could rocket by up to £563 (based on someone with a £150000 interest-only mortgage on a 2.5 per cent SVR and a base rate increase of 4.5 per cent.)
However, 52 per cent of 1192 people polled said they would welcome base rate rises to give their savings a boost.
Kevin Mountford, head of banking at moneysupermarket.com said: “Low interest rates have been fantastic for a large proportion of UK homeowners and subsequently many people have become used to more disposable income each month.
“However, a Base Rate rise will push up mortgage rates forcing many families to reign in their spending – potentially causing financial problems for many.
“As the poll shows, homeowners are clearly worried about the negative effects of a Base Rate rise. 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 accordingly.”
Mark Hooson is a personal finance writer for Moneysupermarket.com, specialising in savings, credit and debt.