New Year mortgage shock

30 December 2007

Cost of mortgages set to rise in spite of expected rate cuts by Bank of England

It is expected that hundreds of thousands of homeowners will probably end up paying more for their mortgages next year in spite of the further predicted rate cuts by the Bank of England.

These falling rates would ordinarily be good news for borrowers, but analysts are warning that many will instead be hit with rising repayments because of the continuing credit crunch. Additionally, over the next 12 months around 1.4m will see the end of their cheap fixed rate deals.

Earlier this month we reported on the rate cut by the Bank of England. Economists are predicting that a further cut of 0.25% will be made in January or February, with at least one further decrease later in the year.

Some are predicting that the rates will be decreased even lower. Capital Economics, a consultancy, predicts that the base rate will be at 4.5% by this time next year.

In spite of these cuts, some lenders are planning to increase the cost of loans for new borrowers as they continue with their struggle to raise funds in the midst of the recent crisis affecting financial markets.