Will mortgage interest rates increase in 2011?

January 1, 2011

For nearly two years now homeowners across the UK have enjoyed the relief that has come from the base interest rate standing at its all time low level of 0.5 percent. The base rate was reduced by the Labour party when it was still in power in the hope of boosting the economy and consumer confidence, both of which had taken a battering due to the financial crisis and the recession.

When the coalition government came into power it made a lot of sweeping changes, but one thing that it decided to leave well alone was the base rate, which the Monetary Policy Committee continuing to vote to keep it steady each month. As a result of this the base rate has been at its lowest level in over three centuries for nearly two years, and many homeowners on variable rate mortgages have been able to save money on their repayments.

However, all good things must come to an end, and the rock bottom base rate is no exception. Most homeowners have realised that they are now on borrowed time when it comes to interest rates, and many listen out for the Bank of England announcement with bated breath each month hoping that the base rate will not have been increased.

Industry official have already predicted that the base rate will increase this year, and a large number of these industry experts believe that it is most likely going to be in the earlier part of the year that the base rate will rise. Whilst the rate rise initially may not be a huge one, some do expect several increased over the next two years, which means that by the end of 2012 homeowners could be paying far more than they are now on their repayments unless they are on a fixed rate deal.

Some believe that now could be a good time to get a fixed rate deal, so that if and when the base rate does rise there will be no effect on repayments for a specified period of time. There are a number of fixed rate mortgage deals available, and if you think you would struggle to keep up with repayment increases over the next two years it may be worth seeing what is available, and whether you are able to switch to a low fixed rate mortgage before it becomes too late.

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Posted by Reno | Filed Under Articles, Mortgages 

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