With interest rates at an all-time low of 0.5% since 2009, there has been much speculation as to when the Bank of England will look to increase the interest rate.
With the UK’s economy on the road to recovery and a general election just a few months away, property experts have been speculating whether the UK’s market can withstand a rise in interest rates.
Forecasts for interest rate rises
The Centre of Economic Business Research (CEBR) believes that one of two scenarios may take place in 2015.
CEBR suggest that the most likely scenario to come into play would take place in October whereby interest rates could climb from 0.5 to as high as 1.25%.
For those on a variable rate mortgage, this could lead to considerable higher repayments and it could mean costly mortgage repayments for those looking to secure a mortgage.
The second scenario could see a slower rise in interest rates, with CEBR forecasting that the Bank of England could increase rates as early as May by 0.25% to 0.75%.
How will the market react to changes?
If the interest rate increases at the rate suggest by CEBR in October, then the collective cost of repayments for British mortgage holders will increase by £1.1 billion however, if they increase at a lesser rate, repayments would rise by £904 million.
Despite the initial inconvenience of the rate rises, it is thought that the market will stay strong and will remain resilient.
Ray Boulger, from mortgage brokers John Charcol, believes that buyer sentiment will not be deterred solely based on news from the Bank of England.
It has been suggested that as long as there is a constant flow of buyers and the market remains relatively active, property prices in 2015 should remain stable.
The continual recovery of the UK’s economy coupled with the fact that wages are forecast to increase at a faster rate than inflation in 2015, will help boost buyer confidence.
“Overall, the evidence does not suggest gradual increases in interest rates from their current historically low levels would have unusually large effects on household spending,” Mark Carney, governor of the Bank of England recently told Sky News.