Around one million first time buyers in the UK have never seen an increase in interest rates in the last five years.
In March 2009, following the financial crisis, the Bank of England slashed the base rate from 5% to 0.5%, which is still intact. However, as the country’s economy is recovering, the interest rates are expected to increase in early 2015.
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Bank of England intends to raise the base rate slowly and stabilise it at around 3%, which is above the 5% norm seen before the financial crisis.
Nationwide CEO, Graham Beale, was quoted by The Telegraph citing Bank of England research as saying that if mortgage rates were to increase by 2.5% to return to 2007 levels, it would push up the cost of a typical mortgage by around £230 a month.
"The proportion of people spending more than 35% of their income on their mortgage could double," Beale added.
According to a research by Save Our Savers, a base rate of 0.5% for exactly 60 months has deprived savers of £326bn due to low savings rates and high inflation.
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By GlobalDataSave Our Savers spokesman, Simon Rose, said low interest rates have not only savaged the nation’s savings, they have also exacerbated their dependency on debt.
"The Bank of England has been incredibly short-sighted in persisting with its low interest rate policy for so long," Rose added.
