Are Loan Rates About To Go Up?
It may be hard to imagine, for someone who has just recently taken out a home owner loan or mortgage that twenty years ago today, the Bank of England base rate of interest on loans and savings reached its all time record high level of 15.4 per cent.
In complete contrast to twenty years ago, the Bank of England base rate has now been at an all time low of just 0.5 per cent for one year, this month and this is leading many people (particularly those with large loan balances) to ask the question- when will interest rates on their loan start to increase?
No one really knows for sure exactly when loan rates are likely to change, but with rates as low as they currently are, they can only move upwards and experts are trying to predict when this will be and how quickly the cost of a loan is likely to go up.
The majority of experts believe that when loan rates eventually do start to rise, any increases will be handled cautiously and therefore only be slight. Although we are unlikely to see similar rates to twenty years ago, many experts think that the base rate for loans and savings will reach around 6.5 per cent over the course of the next five years.
Over the next few years, the banks who received loans from the Government, will have to repay their debt of around £300 billion and the easiest way to raise this money would be to increase interest rates on customers’ loans.
Martijn van der Heijden of HSBC said “The next few years are going to be difficult to predict in terms of mortgage rates and some volatility for borrowers may well be unavoidable. The message for borrowers is that if you couldn’t afford an increase of up to 3% on your mortgage, you should seriously look to fix your payments.”
