16 May 2005
Mortgage payments are set to rise for thousands of homeowners when their low fixed rates expire this year.
Taken out two years ago, the end of the schemes are likely to hit consumers hard at a time when many are likely to be struggling already.
However, economists say that only three-quarters of the effect from the 1.25 per cent rise in interest rates since November 2003 have filtered through.
"There are a number of people, a significant number of people coming off two year fixed rates," said the director-general of the Council of Mortgage Lenders, Michael Coogan.
"That is going to be a significant increase [in mortgage payments] to many individuals," Mr Coogan added.
Some 600,000 people took out fixed rate mortgages when the base rate was 3.5 per cent at the peak of the housing market boom.
Meanwhile, it has been predicted by Capital Economics that the average mortgage payment expiring in the first half of this year will go up by 24 per cent, or 130 pounds.
Likewise, UK economist at BNP Paribas, Alan Clarke has called this imminent problem a "time bomb ticking".
But the Bank of England Governor, Mervyn King played down fears that this problem would have a broader impact on the economy.
He feels that the actually number of households facing such changes is "not large enough to make a difference for consumer spending as a whole".
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