The impact of a small rise in interest rates is likely to be modest for most UK households, according to mortgage lender Nationwide.The Bank of England has been widely tipped to increase rates for the first time in a decade on Thursday.If rates do go up from 0.25% to 0.5%, the effect will be smaller than in the past because more homeowners are on fixed mortgages, Nationwide said.It comes as house prices rose by 0.2% in October, according to Nationwide.The average price of a house in the UK rose by £284 to £211,085. Annual house price growth edged up to 2.5% from 2.3% in September.Is now the time to raise rates?
How would a rate rise affect me?
Nationwide chief economist Robert Gardner said the share of mortgages on variable rates – and so likely to see higher payments if the Bank Rate is increased – has fallen to a record low of about 40%, down from a peak of 70% in 2001.”Moreover, a 0.25% increase in rates is likely to have a modest impact on most borrowers who are on variable rates,” Mr Gardner said.He estimated such a rate rise would increase monthly payments by £15 to £665 for the average mortgage, or an extra £180 a year.Howard Archer, chief economic adviser to the EY Item Club consultancy, said a rate rise could weigh on the housing market.”Housing market activity remains under pressure from squeezed consumer purchasing power, fragile confidence and appreciable caution over engaging in major transactions,” he said.
Source: BBC News