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Brits fear base rate rise

Monday, 13 September 2010 6:00 PM

Brits are worried that the Bank of England interest rate will soon start to rise and put further pressure on household finances.

More than a quarter (27 per cent) are concerned about an increase in the base rate, according to a survey by moneysupermarket.com.

The Bank of England's Monetary Policy Committee has held the rate at 0.5 per cent for nearly a year and a half, which has been good news for many homeowners and given them months of stability in their mortgage payments.

However, a rise in the base rate, which is sure to come, would mean an increase in repayments for many.

Should it go up by one per cent, someone with an interest-only mortgage of £150,000 on a 2.5 per cent standard variable rate would see their charges rise by £125 a month.

A jump to five per cent - the level in October 2008 - would mean an extra £562.50 per month would be needed.

"Whilst it is expected that the Base Rate will creep up slowly, consumers need to understand the effect this will have on their finances and plan accordingly," said Kevin Mountford, head of banking at moneysupermarket.com.

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