Rate rise fears trigger 'fixed rate rush' by homeowners

Caroline Cassidy

Household bills are increasing and petrol prices are soaring, while the latest figures show the biggest monthly increase in the cost of living since records began. With an interest rate rise seemingly inevitable, homeowners across the country are rushing to get a fixed rate mortgage.

Homeowners rush for fixed rate mortgages
Homeowners rush for fixed rate mortgages

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From November to December, inflation increased by one percent, the highest rise since 1996 and economists have warned that it is almost certain to increase further and could even hit five per cent.

That means the Bank of England will almost certainly have to push up interest rates - a move that could put many homes in jeopardy.

The base rate has been fixed at 0.5 per cent since March 2009, giving mortgage-payers with a variable rate some respite from the financial gloom.

But once interest rates begin to rise, a variable mortgage may not be quite such a good deal. Research published by insurance company Aviva today revealed that many families are under "extreme financial pressure" and their biggest worry is the ever-increasing cost of necessities such as petrol, food and utilities.

David Hollingworth from London & Country mortgage brokers, told the Daily Mail: "People will rush to fix because they've probably been worrying about interest rates for a while.

"It is inevitable that more people will fix because rates are expected to start rising."

Sadly, the banks and building societies have cottoned on - the Mail reports that First Direct, Northern Rock and Skipton are already ditching their cheapest deals and offering more expensive options.

What do you think? Will mortgage lenders cash in when interest rates increase? Leave your comments below...