Did you hear that loud, clanging sound of a warning bell? It’s for anyone who owns a property, or thinking of buying one.
Last week, the dishy George-Clooney-lookalike who is guv’nor of the Bank of England dropped a really strong hint that bank interest rates will be going up before the end of the year, saying it “...could happen sooner than markets currently expect.”
We have all been spoilt with record-low interest rates of 0.5 per cent for the past five years, so can’t complain now if the good days are finally coming to an end.
Still, this change is going to come as a nasty shock.
It’s true that most experts agree the hike, whenever it comes, is likely to be tiny – perhaps just a quarter or half a per cent.
But even a mini tweak like this will make a difference to everyone’s monthly mortgage repayments.
For instance, let’s say you’ve borrowed £100,000 over 25 years. If you are on a good deal like 1.98 per cent, that could give monthly repayments of around £422 per month.
But if rates go up and the best deal you can find is suddenly 2.5 per cent, that’s going to push your monthly repayments up to £450 per month.
That’s only another £30 a month but if, as looks likely, interest rates carry on going up all through next year, it could add up to a lot more in the long run.
The smart money is betting on rates rising to eventually reach two or even three per cent next year or the year after, in which case your £100,000 mortgage will be costing well over £500 a month.
Even more worrying, here in Oxfordshire the average house price is now £256,000 and for Oxford city, it’s a whopping £355,000.
No prizes for guessing that many homeowners who have bought in this property bubble have over-stretched themselves and have bigger mortgages than £100,000.
All of which means that any interest rate hikes will hit hard.
Let’s just hope we don’t see a return to the late 1980s/early 1990s, when interest rates spiralled to crazy heights.
It sounds unbelievable now (even to those of us old enough to have been there) but the Bank of England base rate almost hit 15 per cent in 1989.
That was the year When Harry Met Sally and Shirley Valentine packed out cinemas and anyone who was cool carried around one of those new fangled Nintendo Game Boys.
And as we watched the Berlin Wall come down, we saw our mortgage payments shoot up – and up and up.
Which is why that year is also memorable for the hundreds of homes that were repossessed.
Every week, the newspapers were full of stories about people who just couldn’t keep up and ended up losing the roof over their heads.
Scary stuff and hopefully a mere memory but hard to ignore now that the warning bells have started going off again.
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