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6 August 2007
Homeowners with variable rate mortgages are breathing a sigh of relief after getting a temporary reprieve on interest rate rises for the month of August.
It had been predicted by many experts that the Bank of England may decide to hike interest rates up yet again at the August Monetary Policy Committee, taking them from 5.75% to 6%.
Interest rates have already gone up five times in the past year, each time by 0.25%, and this was to try and bring inflation, which had rocketed above the government target, under control.
The base rate in the UK has gone up from 4.5% last August to 5.75% by this July, reflecting a total rise of 1.25% over the past year.
Many homeowners have been pushed to the financial brink because of rising repayments, with some seeing their repayment rocket over the past year. Those coming off fixed rate deals have seen their interest rate shoot up from as low as 4.24% from 2005 to today's base rate, which for many has resulted in an increase of hundreds of pounds on their mortgage repayments.
Recent data has also shown that the level of repossessions in the first half of this year has also risen, as predicted by many experts, as homeowners struggle to keep up with mortgage repayments.
The good news is that those bracing themselves for another interest rate rise and rising repayments in August have been granted a temporary reprieve, as the Bank of England announced last week that it plans to keep interest rates on hold at 5.75% for now.
Although it was decided at the Monetary Policy Committee to keep interest rates on hold for August, borrowers cannot rest too easy. Inflation is still above the government target, and economists state that another interest rate of at least 0.25% is inevitable before the year is out. This means that the base rate could rise to 6% or more, and it is already at its highest in the last six years.
One homeowner who had been worried about another interest rate rise explained that she would have really struggled if her repayments had gone up again so soon after the last rate rise. She said: "If there had been another rate rise this month I really don't know what I would have done. I know that there could still be another rise around the corner, but at least I can rest easy for at least another month or so."
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