The Bank of England has indicated that interest rates will rise next year, potentially reaching 5 per cent.
Monetary Policy Committee member, Paul Fisher, stated that the base rate would 'normalise' at 5 per cent. This means mortgage holders with tracker mortgages could be seeing their interest rates soar as the base rate increases to ten-times the current 0.5 per cent rate.
Rising inflation is causing problems for the economy and increasing the base rate is the obvious solution to this problem. However, it could also result in families spending more of their disposable income on mortgage interest payments, leaving them with less to spend on other things.
In the third quarter of the year, the economy grew by just 0.7 per cent, which was lower than the 0.8 per cent initially expected. Andrew Sentance, another MPC member, also added that gradual rate rises were needed in the New Year to bring inflation down to the target of 2 per cent.
Inflation has been over 3 per cent all year, which the government initially thought was a temporary rise, but has stuck around a little longer than was expected.
