Warning Of ‘Sharp Interest Rate Rises

The last month has seen a number of leading economists warning of ‘sharp interest rate rises’ with the more extreme suggesting that interest rates might have to rise to 8% to control inflation. Andrew Lilico, chief economist at think tank Policy Exchange, has warned that the base rate may spiral ‘rapidly’, this echoing Sir John Gieve, the former Bank of England deputy governor, who said last month that he expected interest rates to rise at a quicker pace than the market expects. If the base rate does rise to these levels, mortgage rates could reach double digit figures, plunging many households in to financial difficulty or worse, repossession. What do we think? We expect interest rates to start rising gradually in 2011/12 with the base rate reaching 2.5% by January 2013. Although there are inflationary pressures to increase the base rate at a faster pace, our economy is precariously balanced and dramatic increases in interest rates will be disastrous. Should you fix your mortgage payments? With interest rates expected to rise in 2011, now is the time to secure a competitive fixed rate mortgage, especially if you’re currently on your lenders standard variable rate (SVR). Many lenders are increasing their SVR now, which they can do at their discretion as many of these rates are not linked directly to the Bank of England base rate. By fixing your mortgage payments now, you’re shielding against future increases in interest rates, which takes the risk of our pessimistic economists actually being right. As independent mortgage advisers, Cooper Associates Ltd provides advice and recommendation on mortgages from the whole of the market. For an initial free consultation without obligation, please contact our head office on 01823 273880 or email us at info@cooperassociatesltd.com www.cooperassociatesltd.com Cooper Associates Ltd is authorised and regulated by the Financial Services Authority. We are entered on the FSA Register No 493369 at http://www.fsa.gov.uk/Pages/register/index.shtmll Your home may be repossessed if you do not keep up repayments on your mortgage