Interest Rates Could Increase Sooner Than Thought
Now that the UK is apparently leaving the recession behind and we are looking forward to some signs of positive growth, however slight that may be, many economics experts are now speculating as to when the base rate of interest is likely to start rising once again, pushing up the cost of home owner loans and personal loans, as well as savings rates.
Most experts have suggested that it is likely that rates will start to rise in the Summer of this year, however new figures for inflation have made many individuals think that the cost of a home owner loan could rise sooner than this due to rate rises.
In November last year, inflation stood at 1.9 per cent. However in December, this increased dramatically to 2.9 per cent, well above the government target figure of just 2 per cent. This has divided the opinion of experts over whether or not interest rates will increase, thereby increasing the cost of a typical variable rate loan, with some saying this could be as early as the Spring, whilst others are claiming that rising interest rates are unlikely to have any effect on inflation in the current economic circumstances.
One member of the Bank of England’s Monetary Policy Committee (MPC) has already suggested that if inflation were to increase suddenly, then interest rates would also rise and the Confederation of British Industry (CBI) has also predicted that interest rates will increase in the Spring this year and reach around 2 per cent by the end of the year.
With interest rates remaining at just 0.5 per cent for almost a year now, many borrowers have become complacent about the cost and amount they owe on their home owner loan and other loan debts, but a sudden increase in interest rates, or even the thought of this, is likely to wake many people up to the reality of having to manage their loan debts once again.
