Mortgage blog: Interest rates set to rise in 2015
A leading think tank has predicted that mortgage rates in the UK will start rising in 2015 after better than expected growth in the economy. The Organisation for Economic Co-Operation and Development (OECD) has upgraded its growth prospects for Britain's economy in 2014 and predicted that mortgage rates will start to rise towards the end of the year.
Ahead of the Chancellor's Autumn Statement, the Evening Standard reports that the OECD believe GDP in this country will rise by 2.4% in 2014, a rise of 0.9% from its most recent prediction in June. The OECD also forecast that interest rates will rise from the historic low of 0.5% to 1% in the last three months of 2015 as the economy recovers.
The Bank of England has already raised the prospect that interest rates - and mortgage payments for millions of homeowners - could rise in 2015. The ‘forward guidance' issued by the new governor, Mark Carney, signalled that interest rates would not rise before unemployment in the UK fell to 7%. Originally estimated to be in 2016, this is now more likely to be a year earlier.
However, the OECD is far clearer in its Economic Outlook over when it believes rates will rise. Sven Blondal from the OECD said: "We expect the first interest rate rise to happen at the end of 2015 and then to have to increase further."
A Treasury spokesman welcomed the report, saying: "This provides more evidence that the UK's hard work is paying off and the country is on the path to prosperity. However, a Labour source said: "Most families are not feeling the recovery because, as the OECD says, real wages are still falling."
Keith Osborne, editor of Whathouse.co.uk says: "What is becoming clear is that the UK economy is recovering and, as that happens, the prospect of an interest rate rise looms ever larger. The Bank of England's main concern is not to damage the economic recovery by adding billions of pounds to household bills by raising mortgage rates.
"However, it is becoming increasingly apparent that it is a case of ‘when' rather than ‘if' interest rates begin to rise over the next year or two."
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