Interest Rates Likely To Go Up Sooner

The Governor of the Bank of England has said in a speech last night that interest rates would be more likely to increase towards the end of this year because the economy was recovering to the extent that a rate increase was now warranted.

The news will be greeted with enthusiasm by borrowers who have done very badly over the last few years but will not be welcomed by borrowers, many of whom have not seen interest rates rise and have therefore had low monthly mortgage payments since buying their homes.

Property Market Will Be Affected When Rate Go Up

It is also probably necessary for the rates to increase to try and cool off the housing market because prices are still increasing beyond the reach of many people. According to many economists the future forecasts for interest rates will be considerably lower than the long term averages.

We could be in for a climate of low interest rates of under 3% compared to the longer term of around 7%. This is good news for homeowners who have come unstuck in the past when Governments were forced to raise rates to deal with overheating economies or because of their financial mismanagement of the economy.

This signals the end of the post-crisis phaase

Because the Bank of England base rates are now set by the Bank of England the Government can't interfere which hopefully means we are going to be in a low interest rate environment for the foreseeable future. The Bank are clearly signaling this is the end of the post-crisis phase of emergency monetary policy when they were forced to lower the rates to their current level and that we are now entering a normalizations of monetary policy.

Mortgage payments will be going up for many borrowers

The good news is that rates are likely to peak at around 2.75% according to experts. Of course this is going to affect borrowers as mortgage payments go up. It has to be said that the bank have been signaling for a while now that rates are going up and that borrowers should take this into account when buying a home.