The US have raised their interest rates 0.25% to 0.5% when will Bank of England also raise rates?
The US Federal Reserves decision to raise US interest rates by 0.25% for the first time in 7 years signals the end to low rates with their plans to raise rates 4 times over the next 12 months.
This will have a knock on effect in the UK with the Bank of England raising rates in the near future and create some new risks for the UK housing market.
The average outstanding mortgage in the UK is currently £118,613 which is 21% higher than before the credit crunch in 2008. Also the UK mortgage debt is currently £1.3 trillion which is an increase of 13% on 2007. An extra increase of just 1% in rates would add an extra £99 per month payment to the average mortgage of £118,613. With over half of UK mortgages on tracker loans many homeowners and property investors will be exposed to any interest rate hikes.
The big question is how high could UK interest rates go and how quickly? At the end of 2007 the UK base rate was at 5.5%, it is currently 0.5%. Go back to end of 1997 it was 7.25% and go back to 1990 it was an eye watering 14%. So even if base rates went back to 5.5% the average mortgage payment per month would increase by £495.
How quickly will UK interest rates rise is unknown, but an interest rate rise will probably happen soon.
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