Rate rise fears

By Laura Carpenter

Some worrying news caught my eye this week. Apparently, there have been suggestions that the Bank of England may increase interest rates again next month.

The base rate currently stands at 5.75 per cent, with mortgage rates approaching about six per cent. However, with the growing cost of property in the UK and the larger loans first-time buyers are taking out, the Bank of England could push these figures higher.

According to new research from the Bank, borrowers are taking out loans worth more money in a bid to get on the housing ladder. This makes me fear for the future of my two kids. God only knows if they will be able to own their home. And if they do, they'll probably end up with a mortgage the size of a small nation.

Over 115,000 people took out mortgages worth a collective £17.3 billion in July, higher than the £17.1 billion taken out in June and to make the picture look even bleaker, credit card borrowing rose by £0.2 billion while the use of personal loans and overdrafts also climbed by £0.9 billion.

And now a series of economic experts have said that the Bank may be forced to increase the base rate in a move to quell growth in the housing market, after several attempts to do the same have failed.

Price comparison website the Motley Fool suggests that the latest news from the Bank is "uncomfortable reading" for borrowers and I concur.

"Although there are promising signs that the housing market may be cooling, interest rates, which are at a six-year high, have yet to temper consumer spending," the company's head of personal finance David Kuo.

"The signs all point to more interest rate rises, and once again it will be put-upon homeowners who will have to bear the brunt of higher borrowing costs."

However, it's good to know that I'm not alone in my fear of further rate rises. A study from Intelligent Finance has found that 41 per cent of the population is either "worried" or "extremely worried" about next month's announcement from the Bank's rate-setting body, the monetary policy committee.

But a twist that makes me fear for the future even more is the news that despite dreading interest rate changes, just 26 per cent of consumers have fixed-rate loans. And in news that also adds to my concern for the financial future of my two kids is that only seven per cent of those aged between 18 and 24 have products with rate protection.

The ICM survey from Intelligent Finance also brought a smile to my face as I noticed that men are much more relaxed about interest rate changes. Less than 25 per cent of women take no notice of fluctuations in the cost of borrowing, compared to a nonchalant 38 per cent of men.

It was also revealed that women - ever the better-prepared - are more likely to choose products that offer some protection in case of future rate changes. Almost 33 per cent of females have chosen loans and mortgages with fixed interest charges, compared to just a fifth of men.

A bit of good news from this week was that house prices are beginning to loosen-up, with Nationwide noting a fall in average prices from £184,270 in July to £183,898 in August. At least there's some hope for the future.