Repossession risk may be reduced as base rate tipped for long-term hold

Those at risk of repossession if there is a rise in the base rate soon may be spared due to the base rate staying low for a couple more years, something one expert has said is highly possible.

David Smith, economics editor at the Sunday Times, said it will be a "long time" before there is a base rate hike.

He explained: "If you were to trace these back, you would see that right through from March 2009 – when the bank rate was cut to half a per cent – people expected rates to start rising maybe nine to 12 months later."

But, he observed, this clearly has not happened and there is no reason to suggest this is about to change.

Mr Smith added that it is quite likely the cost of borrowing will not have changed by the time the Bank's governor Mervyn King leaves office at the end of his term in mid-2013.

One reason Mr Smith expects the rate to stay low is the state of the economy, claiming it is a "minor miracle" that gross domestic product is growing at all and that it will be a long time before it is likely to get back to "normal".

While low rates may help some homeowners avoid the doomsday scenario of losing their homes, others may find that by keeping their mortgage repayments down it frees up cash to use for debt consolidation.

The Bank of England's Monetary Policy Committee was unanimous in holding the rate this month, minutes published last week have revealed.

It was the second month in a row this had happened, which represents a hardening of the body's position after at least one member had voted for a rate rise at every meeting since May 2010.

Posted by Paul Thacker