Repossessions may rise if interest rates go up in 2011

Posted: 24 Dec 2010 10:28:24 GMT

A specialist has suggested more homes could be repossessed if interest rates rise by two per cent next year.

The number of repossessions could rise if interest rates were to increase by around two per cent, one expert has claimed.

Paul Holmes, chief executive officer of Firstrung, suggested if they did go up and lenders were to pass it on to borrowers, it could be "quite catastrophic".

"It would be an awful lot for people to cope with, particularly in terms of unemployment, less working hours, et cetera. [It] could push the economy over the edge," he added.

However, Mr Holmes explained he does not think interest rates will rise for a while yet, as the Monetary Policy Committee (MPC) knows that doing so could be damaging.

And the MPC also have to consider the impact an increase would have in terms of international markets, as they would not want to have to operate in a degree of isolation, he remarked.

According to the Confederation of British Industry, in 2011 inflation will be higher than what has been forecast, because of greater pressure from commodity and energy prices.

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