Interest rate rise to hit homeowners?

More homeowners could be facing repossession when the base rate finally rises, an expert has said.

Discussing the debt issues some could face, creative director at digital marketing agency Dallas Matthews Chris Jenkins suggested homeowners start planning ahead to avoid being caught out, since in addition to the possibility of the cost of borrowing changing, other prices will jump too.

Singling out utility bills as one additional rising cost, he warned this combination of extra costs could lead to some suffering the loss of their homes as the debt becomes too much.

Mr Matthews remarked: “My advice to homeowners would be not to bury their head in the sand. Interest rates will rise sooner or later and you need to prepare.”

Noting lenders can advise consumers of the new repayments to after a base rate rise, he added: “Knowing the amount that payments will increase by will help to plan for the long term and stay debt free.”

The likelihood of an increase from the current 0.5 per cent level the Bank of England’s Monetary Policy Committee (MPC) has maintained since March last year may be growing, after this week revealed inflation has climbed.

With the Consumer Prices Index (CPI) figure at 3.3 per cent, MPC member and recent advocate of a tighter monetary policy Andrew Sentance told BBC Radio 4 a situation is developing in which rate increases “make more sense”.

The CPI figure rose 0.1 per cent from October’s level and has been consistently at one per cent or more above the target figure of two per cent through the course of 2010.

By Joe White