Bank of England: Interest rate remains at 0.5%

MD of Estate Agents Spicerhaart Mark Pilling said:

“It would have been a double blow to increase the base rate in the same month as VAT rose to 20%. While borrowers have been granted a temporary reprieve, however, as inflation remains well above the 2% target it will not be too long before the base rate goes up. When this does happen, homeowners on variable rate mortgages who have just about been meeting their repayments at the current record low interest rate level will suddenly find themselves even more financially stretched. This, along with the VAT hike and likely rise in unemployment caused by public spending cuts, means we must be prepared for an increase in repossessions and assisted voluntary sales later in the year.”

Nicholas Leeming, commercial director of Zoopla.co.uk, said:

“The base rate will have to rise over the next six to twelve months as the Bank of England will be forced to make some tough decisions on controlling inflation. It may only be raised by 0.25 percentage points but any rise is going to increase the mortgage repayments of anyone on a tracker or SVR mortgage. A rise beyond 0.25 percentage points could add hundreds of pounds a month to the cost of millions of mortgages across the UK. Those already on a tracker or SVR mortgage, and anyone considering one, need to seriously weigh-up whether they have enough of a cushion in their income to be able to afford their repayments when we finally see this historic run of low rates come to an end.”

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