Fast interest rate rise 'would create problems'

Posted: 24 Feb 2011 11:10:27 GMT

A sharp interest rate rise may come as a shock to some.

Homeowners may have trouble keeping up with financial outgoings if interest rates rise too sharply.

That is according to Ray Boulger, senior technical manager at John Charcol, who suggested that people have become used to interest rates being so low and it will be a shock to them when they begin to rise again.

Those who took out a fixed-rate mortgage at around five per cent before the recession will probably not feel any change, but an interest rate hike will affect those who have come to rely on the extra cash they have enjoyed in the past couple of years, he said.

Mr Boulger added: "Some people will have been very sensible and used at least some of the extra cash they have had to reduce their debts and then they will of course be in a better position when rates do go up."

The Bank of England Monetary Policy Committee voted to keep the base rate at 0.5 per cent at its last meeting on February 10th.
 

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