Homeowners face interest rate hike

Christmas is going to be tough for many cash-strapped Brits but there will be no let-up for those struggling with household bills and mortgage payments.

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Britain's leading business organisation, the Confederation of British Industry, has warned that interest rates may soon rise to six times their current level, which could leave many families trying to find more than £200 a month extra to meet their monthly mortgage payments.

The CBI predicted that interest rates, which are currently at a low of 0.5 per cent, will hit 1.25 per cent by the end of next year and 2.75 per cent by the end of 2012.

And that's despite the "very sluggish" economic growth.

Should the predicted rise to 2.75 per cent occur, homeowners would have to cope with £202 a month extra on a £150,000 mortgage.

Ray Boulger, a mortgage adviser from John Charcol, told the Daily Mail: "Those who will be hardest hit are those whose finances are already on a knife-edge because they have either lost their job, suffered a loss of income or borrowed too much.

"Most people will be able to cope but they should think about paying back other debts and cutting their spending to prepare for rates going up."

Unfortunately the prediction only adds to fears that the housing market will continue to fall and, since a survey by Markit Economics found that 18 per cent of Brits are still borrowing, the future looks bleak for those were briefly able to take advantage of record low interest rates.

Are you worried about interest rate rises or have you already cut spending in preparation? Leave your comments below...