Record low interest rates that have stayed at 0.5% from 2009 may now be facing the possibility of rising. A member of the group that helped to set up the Help to Buy scheme said that there is room to manoeuvre on interest rates.
However, Ben Broadbent is cautious, “We want to ensure that this recovery continues and is not choked off by a premature rise in interest rates.” Although he believes, “there is a fair amount they could go up before borrowers got into great difficulties.”
Although many householders will find that their monthly outgoings will increase due to their monthly mortgage payments rising, this may also instigate a rise in homes being repossessed. The chief economist from the Bank of England, Spencer Dale commented on this after being asked about the topic: “when we raise interest rates the economy should be stronger, higher employment, higher real wages,” and he states that a rise in interest rates is unlikely as the economy hasn’t risen that significantly. During recent social media activity he said “Rates will only rise when had sustained period of strong growth as long as no risk to stability.”
The new Help to Buy scheme helps new home buyers by only requiring a 5% deposit, covering UK homes selling for up to £600,000 and allowing more to get onto the property ladder.
There are doubts that those on the help to buy scheme may run into money problems once the interest rates have increased, possibly leading to homes under the scheme being repossessed. Ben Broadbent pacified this concern stating that “the numbers entering this scheme are relatively low and although interest rates will, as you say, at some point start to rise, it is worth remembering quite how low a level we are starting from.”
The £375 billion in use for a quantitative easing plan also won’t change according to the Bank Monetary Policy Committee. This decision however has been questioned however, as it is believed that only the financial sector benefits from the package, rather than the entire economy.