UK Mortgage rates to 6% by December

Like most homeowners these days in the UK we have a fairly hefty mortgage. We have made some money on two previous house moves but this never seems to keep up with the rise in house prices - so we still find ourselves with a substantial mortgage. Now our finances are not as tight as some. There are people who are already spending a significant amount of their monthly income on financing their mortgage. we are not in that category because we remortgaged to a better deal when we moved. Nevertheless anything that pushes up our mortgage payments is not very welcome.

Well according to Mervyn king the Bank of England governor who was speaking to the Welsh CBI there is every reason to think that UK interest rates will rise to 6 per cent by the end of this year.

The bank kept rates on hold at 5.5 per cent last week. But Mervyn King has talked worrying inflationary pressures and he says these must be controlled.

He also gave a warning to those people who are on variable rate mortgages "Obvious though the point may seem, it is unwise to borrow so much that the repayments are affordable only if interest rates remain at their initial levels.”

It seems that he wants to see slower household and company spending and of course a rising interest rate would aim to achieve just that.

We are going to have another look at our mortgage and see if there might be any benefit for us in remortgaging at this point. I suspect that a lot of other people will be analysing their mortgage arrangements and thinking about whether there are any good re-mortgaging deals available.