Bank of England Governor Mark Carney has said interest rates could go up sooner than expected.
In a recent speech at the Lord Mayor’s banquet in London last week, Carney told guests that the first rate rise “could happen sooner than the markets currently expect”
With some analyists predicting a 0.5% rate in the Bank of England Base rate in Quarter 4 2014 as a distinct possibility, what will this mean to borrowers.
With 6 out of 10 borrowers on a variable rate that will rise alongside base rate, borrower will need to act fast before lenders increase their fixed rates in anticipation of future base rate rises. UK Asset Resolution believes a 1% rate rise could force 22,000 of it’s customers into repayment arrears.
Below is an example of what a potential rise in the base rate would mean to existing borrowers:
Based on a £200,000 repayment mortgage with 23 years remaining, on a rate of 3% currently would see their payments go from £1004 to £1056 if rates rise by 0.5% and to £1109 if there is a 1% increase. The advice to home owners and would be borrowers, is to lock in at a rate where they feel they’d be comfortable paying , for as long a period as they can.
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