Some members of the Bank of England’s Monetary Policy Committee are edging closer to voting for an increase to base rate, according to minutes from its latest meeting. While senior UK economist Samuel Tombs says it is unlikely that the base rate will be increased until early next year, the Committee indicated that within the next three years it’s expectation the Bank of England Base Rate will rise by around 2.5%. These would take base rates to 3%, a significant alteration from their current ongoing historic low of 0.5%, where they have remained since 2009.
Mortgage holders need to be prepared
Millions of mortgage borrowers are at risk of financial hardship when the Bank of England begins to raise interest rates, a major study of household debt will report this week. Approximately two million mortgage holders could be unprepared for the potential increase in mortgage payments.*
Experts respond to potential rise
Economist Matthew Whittaker commented that it was becoming imperative for lenders to identify customers who could potentially struggle to make repayments once rates start to rise. "We need to act now” he said, “in order to help prepare for a future of higher repayments.” He acknowledged that some lender had plans already in place, but continued: “It's crucial that the whole industry wakes up to the need to identify and engage with these at-risk customers."
Summing up, Whittaker concluded that: "We need to prompt the most at-risk borrowers to confront the reality of what their finances might look like in a few years – even if it comes as an unwelcome shock to some of them. Many will be able to take evasive action and make plans for the return to an age of more normal interest rates.”
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*Source: The Resolution Foundation