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Higher rates 'should not be cause for concern’

Potential increases in the Bank of England base rate and knock-on effects on mortgage costs should not worry most homeowners, a broker says.

Private Finance that a majority of its clients claim to be “gravely concerned” about the possible impact of a hike in the base rate, which Bank of England governor Mark Carney suggested recently could come as soon as the turn of the year.

But the firm said that even if the rate was lifted from its current all-time low of 0.5%, any increases were likely to be small and gradual.

Private Finance also reported that many would-be first-time buyers were being deterred from taking their initial step on the property ladder due to worries over rising mortgage costs.

Simon Checkley, managing director of Private Finance, said: “There is still considerable uncertainty over when exactly interest rates will rise. However, what is certain is that rates are highly unlikely to increase dramatically enough to have a major impact on a large proportion of homeowners.

“Even if rates were to rise by as much as 2%, we would see that a typical client with a joint income of around £80,000 would still only be looking at paying a small amount more each month.”

Checkley added that a short- or medium-term rise of 2% was likely to be a “worst-case scenario”, however. “A rise of 0.5% or 1% is far more likely, which would make additional payments even more manageable for most joint income households.”

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