Borrowers Should Prepare For Loan Rates Of Up To 5 Per Cent
For almost two years now, those individuals who have had a variable, or tracker rate on their home owner loan or mortgage have enjoyed the benefits of a particularly cheap loan, due to the low base rate of interest which has been set by the Bank of England.
Although the base rate of interest for loans and savings has remained at its lowest ever level of just 0.5 per cent since March 2009, the Bank has warned borrowers that they should not get used to these particularly low rates and should prepare for interest rate rises and therefore an increase in the monthly cost of their home owner loan.
Paul Fisher of the Bank of England and Monetary Policy Committee (MPC) member, has predicted that the base rate of interest for loans could return to the level of around 5 per cent, similar to rate levels prior to the credit crunch.
Mr Fisher commented that the cost of a home owner loan was particularly cheap at the moment and this is currently a false situation, in order to help the UK economy, but loan rates would eventually return to a more normal level of around the 5 per cent mark.
He said that loan rates would not increase immediately to 5 per cent, but this move would occur in small interest rate rises over a period of time, to help cushion the blow for loan customers and that people should be taking advice from financial advisers and loan brokers now, before the rate rises happen.
“Obviously the first time we raise base rates that will be a big signal to people. But you’d like to think independent financial advisers and others will be bringing this home to people when they are arranging their mortgages and other loans.”
