UK homeowners with variable rate mortgages have had a rough twelve months, with five interest rates of 0.25% having been applied to the base rate since August of last year, taking the base rate from 4.5% to 4.75%. many homeowners on variable rate loans have seen their repayments rocket over the past year, and this has put a large number of homeowners in a difficult position, as they are struggling to keep up with repayments on their home, and, as predicted by many experts and industry officials, the level of repossession taking place has rocketed.
The good news for homeowners is that the Bank of England has decided to keep the rates stable at 5.75% for August, with an announcement being made last week following the Monetary Policy Committee meeting. This means that there will be no rise in repayments for this month, and homeowners can breathe a sigh of relief, although it may be short lived. It is widely thought by economists and analysts that the interest rate will have to rise at least one more time this year, which means that it could hit 6% before 2007 is out.
A recent quarterly inflation report has also indicated that at least one more interest rate rise is needed in order to try and bring inflation back under control. Inflation is currently at 2.4%, and although this has come down from 3.1% in March, the government target is actually 2%, so there is still some way to go. The report indicated that a further interest rate rise is needed to make this happen, and although this is good news in terms of the government target it will not help homeowners that are already struggling with repayments.
One homeowner expressed her relief over rates staying put for this month, stating: “If there had been another rate rise this month I really don’t know what I would have done. I know that there could still be another rise around the corner, but at least I can rest easy for at least another month or so.”
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