The possibility that the Bank of England may raise interest rates has set homeowners into panic, causing a 42 per cent increase in the number of people re-mortgaging, compared to that of the same month in 2009.
This increase is the highest for two years. Experts observed that in November, 34,262 people changed to a rival bank or building society, a vast increase to that of 23,973 in November 2009.
The current base rate of 0.5 per cent has remained static for the longest period of time since the Second World War, thus a sudden increase will have significant impact on homeowners with large mortgages.
For homeowners with tracker or variable rate mortgages who have become used to very low monthly repayments, an increase in interest rates, coupled with the VAT rise and increase in fuel duty, may start to be caused some financial difficulty.
Fears have been fuelled by experts, such as the CBI, who estimate that the base rate will rise to 2.5 per cent by the end of this year and 2.74 per cent by the end of 2012.
Chief UK economist at the consultancy HIS Global Insight, Howard Archer said: ‘There seems to be an increasing risk that the Bank could raise interest rates earlier than expected in 2011 to counter above target and rising inflation.’
The outcome of this will allow the re-mortgaging market to thrive once again as Melanie Bien, director of Independent mortgage broker Private Finance, points out: ‘The re-mortgaging market has been dead in the water but it is coming back to life. People are now taking the plunge because of fear that rates are going up.’