Interest rates in the UK are expected to rise by 1% this year. Some people are speculating that this inflation will cause over 20,000 people to fall behind on their mortgage repayments and push them unwillingly into mortgage arrears.
One of the people who believes this will happen is Richard Banks, who is the chief executive of UK Asset Resolution. This bank is currently running down the loans from Northern Rock and Bradford & Bingley which both collapsed during the 2008 economic crisis. It is currently repaying £38.3 billion owed to the government and has so far paid back £10.4 billion.
He says: “If interest rates rise, the impact on our customers depends on how quickly they rise.” He continued to explain that it would be far better for customers if rises were “small and often over a long period” as opposed to a sudden, large hike.
Another critic of the potential sudden hikes in interest rates is Mr. Charles Bean, who is the deputy governor of the Bank Of England. He predicts that UK interests could rise as much as 3% over the next few years. He believes that it’s important that it “moves in baby steps to avoid making mistakes”.
These speculations began at the beginning of the year when members at the last meeting of the Bank Of England’s Monetary Policy Committee seemed to be changing their opinions on the proposed idea of higher interest rates. These meetings took place took place between May 7th and 8th.
Mr. Charles Bean does not believe that these interest rates will increase until next spring 2015 at the earliest. Since 2009, the United Kingdom’s interest rate has been at an all-time low of 0.5%, allowing people to recover from the 2008 economic crisis which was followed by a recession.
Most banks and building societies in the country offer mortgage plans that you can repay with interest. Mortgage Express, owned by Bradford & Bingley, was one of them, but it now only deals with existing customers since it was nationalised in 2008.
Recently, the Government’s Help to Buy scheme has helped thousands of people get on the property ladder thanks to a low initial deposit and lower interest rates on repayments. However, if the interest rate rises this will mean that those who could initially afford Help to Buy may no longer be able to.
If you wish to get more advice about the effect of rising interest rates, call the Mortgage Express contact number.