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Interest rate.

Update 2014

Strongest signs yet to an early interest rate rise have been given by the Governor of the Bank of England, during a speech at the Mansion House Dinner in London.
We are aware that opinion as to an interest rate rise has become 'balanced' within the Bank of England Policy Committee, whist in the past,t opinion was to very much keep interest rates at a record low.

So whilst predictions have been for an interest rate rise in early 2016, we could see a rise as early as the 3rd quarter of 2015, and the signs are very much in evidence.

- Low employment
- A housing market growing at over 10% per year
- An economy that is growing far more strongly than expected.

We are told by the chancellor that the housing market does not represent an immediate problem, but there is not a month that goes by without new measures to quell the property market.

The latest being new powers given to the Bank of England to prevent the housing market from overheating, which include capping the size of mortgages, whilst the Governments rhetoric on this occasion has substance, it may be a case of the horse already bolting! Having basked in low interest rates for so long, many borrowers have become accustomed to their expenditure and are living to their means.

An increase in interest rates of 0.5% on a £350,000 mortgage represents an increase in payment of almost £150, with interest rates predicted to increase by up to 2% over the next few years that could represent an increase in payments of £600 per month.

Latest figures from the Office of National Statistics found property prices rising 17% in London and on average 8% for the rest of the country, however even before the renewed interest rate speculation the Royal Institute of Chartered Surveyors predict that growth in London will slow to 6% annually, with the rest of the country easing to 6%.

We anticipate slow rises in interest rates, and a rise of 0.25% would come as no surprise, and would send a message to businesses and borrowers, it's still early days to see how the new stringent tests for borrowing are taking hold but early signs are that it is having an impact.

The problem facing many, as mentioned, is the prospect of interest rates rising and not being able to afford it, because lenders were all too keen to lend whist the rates have been low and people getting used to living to their means.

If the government is concerned about the property market growth we recommend that the government also consider further caps on the level of foreign investment or increasing the supply of new housing by further relaxing the constraints facing builders.

We would expect to see an increase in debt problems and repossessions, during a time when interest rates are on the rise, if you are concerned about debt take advice as soon as you can, it will help, for advice and guidance read our debt page.

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