Will Homeowner Loan Rates Increase This Year?
Last Thursday (10th June) the Bank of England’s Monetary Policy Committee (MPC) voted to keep the Bank of England Base rate of interest for loans and savings at its record low level of just 0.5 per cent. The base rate has now remained at this low level for a total of fifteen months.
At the beginning of this year, there was speculation that interest rates were likely to increase around spring time. When nothing happened to loan rates during April or May, this prediction was put back to later in the year. But now many people are asking whether interest rates will rise at all this year, or whether their home owner loan or mortgage will remain at its current cheap loan rate.
The majority of financial experts now believe that, due to the fragile nature of the UK economy at the moment, it is looking ever more unlikely that interest rates will increase before the end of this year.
Although inflation has risen dramatically to 3.7 per cent, which would normally be a trigger to increase interest rates to compensate for this, the Bank’s view is that this rise is due to temporary problems and inflation will return to the 2 per cent target by the end of the year.
The main concern over increasing interest rates is for the housing and home owner loan markets. Many people with existing loans are currently on a knife edge with their finances and an increase in the cost of their monthly loan repayments could just push them over the edge.
Increased home owner loan costs are also likely to deter individuals from entering the housing market at all, which would have a damaging effect on an already fragile economy.
Although the UK economy is in an extremely delicate and unpredictable situation at the moment it seems increasingly likely that we will not see interest rates rise before the end of this year.
