Rate increase 'will harm mortgage holders'
Published On 12 May 2007
The quarter point increase in interest rates announced earlier this week will have a significant impact on people with mortgages and first-time buyers, industry experts have warned.The Bank of England's Monetary Policy Committee decided that the increase in interest rates was necessary to curb inflationary pressure in the UK economy.
However, Vicky Redwood, an economist at Capital Economics, said that the increase could put first-time buyers off looking for a mortgage.
"In itself a quarter of a percent isn't huge, but when you take it on top of the three rate rises we've already seen, and the fact that house prices have still been rising by ten per cent a year, it makes it even harder for first time buyers to buy their own house," she explained.
"The big difference will be an increase in mortgage interest payments. That should make a significant difference for many households."
Trevor Williams, the chief economist for Lloyds TSB, also added that people who were already struggling to make mortgage repayments could not find themselves in serious financial trouble.
He said the move would "take income out of the hands of those people who are paying variable rate linked mortgages".
