Mortgage warning issued over future rate rises

Private bank customers with large mortgages should brace themselves for sharp interest rate increases as the economy improves.

This is the view of a financial expert from specialist website Fool.co.uk, which released new analysis on the mortgage market today.

The Bank of England has held rates at an all-time low of 0.5 per cent since March, in an attempt to stimulate lending flows and economic growth.

A £175 billion programme of quantitative easing - the modern-day equivalent of printing money - has also been introduced to the same ends.

However, David Kuo, director at Fool.co.uk, warned that the Bank could tighten policy quickly when GDP turns positive.

This could catch out some borrowers who are on variable rate deals, such as trackers or their lender’s SVR.

Mr Kuo added: ’Over the last year the Bank of England interest rates have come down and a lot of people on tracker mortgages have benefited from that but these people haven’t been prudent enough to carry on paying what they were paying before and have paid the lesser rate, but this doesn’t mean they have reduced their debts.

’When the interest rate goes back up again these people will suddenly be inundated with massive increases in their monthly mortgage repayments.’ ADNFCR-2318-ID-19324643-ADNFCR