Disaster predicted as rates rise again

Posted: 12 Jan 2007 11:37:32 GMT

Yesterday's rise in interest rates to 5.25 per cent could have some home-owners struggling to keep up repayments on their home

Yesterday's rise in interest rates to 5.25 per cent could have some home-owners struggling to keep up repayments on their home.

The Bank of England surprised many experts when it opted for the third rise in interest rates in six months.

However, the Monetary Policy Committee who set the rate felt their decision was necessary to try to slow inflation.

Holders of variable rate mortgages and base-rate tracker mortgages will see increases in their monthly repayments, which many just might not be able to manage.

It remains to be seen whether the change in rates will have an effect on the buoyancy of the housing market.

Peter Tutton, a policy officer for Citizens Advice commented: "Any increase in mortgage interest rates could spell disaster for people whose finances are balanced on the very edge of affordability."

He hoped that mortgage lenders would be sympathetic to those struggling to pay and advised caution to people thinking of taking out a new mortgage.


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