Interest rates rise expected

AS the Bank of England prepares to increase the interest rate tomorrow for the first time in more than three years, Suffolk's mortgage payers will have to find more money each month.

AS the Bank of England prepares to increase the interest rate tomorrow for the first time in more than three years, Suffolk's mortgage payers will have to find more money each month.

The bank is expected to up the stakes to a predicted 3.5 per cent (up by a quarter of a point) but some analysts predict it could be higher – up to 4pc.

This will be the first interest rate rise since February 2000 with the present figure now at 3.25pc being the lowest for 48 years.

The predicted rise tomorrow could be weathered but anything more could cause some difficulties for anyone who has overstretched themselves with their mortgage believes Colin Girling, an Ipswich estate agent and spokesman for the National Association of Estate Agents.


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"At the moment it would not be as serious as the negative equity situation of the late 1980s and early 1990s. But if, as predicted, there is to be several rises to the interest rate over the coming months it would be disastrous for those who have taken out a maximum mortgage," he said.

There is no evidence at the moment that negative equity will come in to play because house prices are not falling.

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Mr Girling said he believes mortgage payers will be able to weather the storm incurred by an interest rate rise of up to 3.5pc but if it creeps up that is when problems will arise.

"There will be a lot of people who are hit hard, those who have taken out maximum mortgages will really feel the pinch and I think we will see more houses coming on the market, people who have no choice but to sell up."

Mr Girling said a lot of people have put savings in to buying property as an investment to boost their pensions in later years.

"If they have done this with the aid of a second mortgage they could be feeling worried but I know of some people who have used savings to buy property as an investment and this should still be sound.

"They still have a degree of control because property is a good way to invest but not if the interest rate goes up heavily and mortgage repayments rise accordingly," he added.

Property prices in Ipswich and area are still solid but first time buyers are finding it difficult to get on the property ladder.

Mr Girling said there are very few smaller terrace-style houses on the market at the moment which at around £85,000 are the maximum a first-time buyer could pay.

"The main prices really start at around £100,000 and from this price up to about £300,000 or so they are selling well," he said.

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