Interest rate increase 'will hurt some borrowers'

By Sarah Engle, Mon 24 Aug 2009 - Published in Loans

Borrowers should treat low interest rates carefully because they will not be around forever, an expert has said.

David Kuo, director at the financial website Fool.co.uk, pointed out that rates will increase rapidly once the UK enters into economic recovery, meaning people should not saddle themselves with too much debt.

"My message to the people has been to keep paying what you have always been paying on your debts and mortgages because when the interest rate does eventually go back up it will hit you like a rock," he explained.

In addition, the expert noted that many people who are on tracker mortgages will have benefited from the reduced payments created by the historically-low base interest rate, but will face large increases when it returns to normal levels.

Earlier this month, the Bank of England voted to maintain the base interest rate at 0.5 per cent, which is the lowest it has been in the institution's history.

The organisation also increased its asset purchase programme by Ł50 billion, taking the scheme to a total of Ł175 billion.

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