Base rate to be at 2.75% by end of 2012

Interest rates will rise this August, with a number of further increases taking the base rate to 2.75% by the end of next year, the British Chambers of Commerce (BCC) has predicted.

In its quarterly forecast, the BCC has again reiterated its belief that the base rate should be held until the last three months of 2011 at the earliest, but believes it will be increased in the third quarter.

We are expecting the Bank of England rate to start increasing in August 2011. Although we would prefer to see interest rates held until the fourth quarter, we believe British businesses will be able to absorb small increases," said David Kern, chief economist at the BCC.

However, Mr Kerns has urged the Monetary Policy Committee - which sets interest rates for the Bank of England each month - not to be too aggressive in its tightening.

The group expects interest rates to increase from August 2011, but at a faster pace than previously envisaged, with the Bank of England's base rate reaching 1% by the end of 2011, and 2.75% by the end of 2012.

Think about this – is your income going to increase an additional 2.25% by the end of next year to accommodate this change in your mortgage costs that a Base Rate Rise will bring ?

If you are one of the many people who are on your lender’s variable rate, you need to start to consider the impact on your budget of a 2.25% rise in your mortgage rate will have now , not then - why? - because when rates do rise, lenders will be taking advantage of those who need to change to a fixed rate having already increased their costs.

Fact - lenders have increased their fixed rate mortgage costs 15% in the last 18 months (and that is with the Base Rate not moving)

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If that is a concern and you would like to discuss about moving to a fixed rate strategy to protect your budget then please get in touch so I can help you.

Thanks as always for your attention.

Mark (mark@themortgagemonkey.co.uk )