“I think if we were to lower it any further than that, it’s going to unfairly penalise people who’ve done the right thing - have saved for their future.”
“Well the Bank of England, in relation to the base rate at the moment, should try and keep it as low as possible. You’ve got to understand that inflationary pressures are abound at the moment, so they may have to put it up at the moment just slightly, but to keep it as low as possible for mortgages and things like that so people can still get out and spend.”
“I would like to see it stay where it is for the next sort of 18 months / 2 years.”
“I don’t think that a huge increase in the base rate would be welcome, but I think a little to give people the incentive to save, which they’re not doing now.”
“We’re stuck between a rock and a hard place really, I’m not sure that there is anything that can be done.”
FKE: Yet one in four people admit they would be frightened if base rate started to rising, in fact 27% saying they would worry about how to meet their mortgage payments if the rate went up.
That’s worrying news because, although some economists think base rate will stay flat for years to come, others are predicting it could be as high as 8% by 2012.
Let’s put that in context:
If you have an interest-only mortgage of £150,000 and you’re on a standard variable rate of 2.5%, then you’re paying £312.50 a month.
But if base rate rose by just one percent, your repayments would leap to £437.50 – that’s an extra £125 a month.
If base rate rose to the 5.00% it was at almost two years ago, your rate could be as high as 7% - that’s going to cost you £875 a month, that’s quite a difference.
FKE: So, could you cope?
“Yes, I fixed because I wanted peace of mind with my mortgage - I didn’t believe that interest rates were going to stay low.”
“Yes, I’m really worried about interest rates going up because I can’t fix my mortgage because my house is in negative equity. So, I am really worried about whether I will be able to afford my mortgage.”
“We recently brought a house this summer and we locked into a 5-year fixed rate because we were concerned that rates were going to go one way, and that’s up.”
“If interest rates went up in the near future I would probably be ok myself, I’ve got enough breathing space personally because my mortgage is nearly at its end now but I think for any new buyers, or people who have just took out a recent mortgage, it may be difficult to cope with the increase in the interest rates.”
FKE: Low base rate has been fantastic news for many homeowners because it’s really cut what they pay, but it can’t last forever and it’s important to take steps to protect yourself in case rates do rise.
If you’re sitting on your lender’s standard variable rate, then it’s time to think about fixing so that if rates do rise you are protected.