Interest Rates to Hit 8% by 2012 - 23/08/2010

Author: Jeni Browne Posted on: 23 August 2010

The Daily Express today published a front page article quoting a Chief Economist at Policy Exchange as saying that rates could return to levels not seen since the 1990s to stave off soaring inflation.

The impact of rates reaching this level could have monumental impact on the UK housing market.   With borrowers opting to take tracker rates in the belief that base rate will remain low for the next few years, many are now exposed.  With the average tracker rate at 2.5% over base, this could see people left paying a rate of over 10%.  This inturn would push many into arrears and risk repossession.

While the possibility of 8% rates in the next two years is a somewhat radical change from most other think tanks and economists, this prediction will no doubt focus the mind once again, into thinking that perhaps a fixed rate for the next 3-5 years is not such a bad idea afterall.