UK economic health depends on many sectors showing steady growth and the ability to maintain levels of performance.  The housing market is one area that has a large impact on the economy and connected to that market is lending.  It was the downfall of the lending market’s concentration in the housing sector that led to the recession that impacted the entire globe including the UK.  Lessons have been learned and policy changes have been put into place in hopes of preventing a repeat of the same problems that caused so much damage.

Now the economy is rebounding.  Some sectors of the economy are back to pre-recession levels, some have surpassed it and others are still struggling but nevertheless they are on a rebound.  Due to the rising health of the economy, the safety nets put into place to stop the recession from becoming a depression are now no longer needed.  In fact, those safety nets set to save the economy could have an impact on slowing or even halting the progress already made.

Cheap borrowing for those seeking a mortgage and remortgage is one area that was meant to help the economy but is now causing concern with the average house price soaring to new highs over the last few months.  This has had financial experts warning of a looming housing market bubble.  The Bank of England’s Monetary Policy Committee (MPC) has also been watching the housing market closely.  All factors that could cause the MPC to increase the standard base interest rate appear to be coming together to a point that will push them to take action and vote for a rate hike.

Once the 0.5% interest rate begins to increase it has been said it will do so slowly and steadily over the next 3-5 years.  However, even a slight increase could cause some households to struggle with their budget. 

The housing market growth has brought a rebound to homeowner’s equity levels and it has stimulated growth in the economy.  This is good news but the bad news is for those that have been finding it hard to handle the impact of the recession and are still fighting to keep above their debt or are only now regaining hold of their debt.  Higher interest rates will tighten budgets even more especially for those without a fixed rate mortgage deal. 

Those that could benefit from a remortgage should start to shop around now while rates are still low and lending has not tightened too harshly.  For those with little time to spare and complicated remortgages, perhaps a remortgage broker could be beneficial.  It is time to sit up and take notice for the Bank is going to increase the interest rate.  It is inevitable and it could happen before the end of the year.