Over the course of the past twelve months or so, those individuals with home owner loans and mortgages on a variable or tracker rate have enjoyed a period of particularly low interest rates being applied to their loan repayments.

For some lucky people with a tracker rate loan, they have ended up paying less than 1 per cent interest on their home owner loan. In summer 2008, the base rate of interest stood at 5.5 per cent and due to the effects of the credit crunch and economic slow down, this has steadily fallen until it reached just 0.5 per cent in April this year, the lowest base rate since in the history of the Bank of England.

Many experts and borrowers alike expected interest rates to increase during 2009, returning their loan repayment costs to pre credit crunch levels, but the extended recession has meant that the Bank of England have maintained this low rate for such a long period of time that borrowers are starting to get used to it. But the Confederation of British Industry (CBI) has warned borrowers that it expects the base rate to increase once again in spring 2010, as the UK leaved recession and the economy starts to recover, eventually reaching a rate of 2 per cent by the end of next year.

Ian McCafferty of the CBI said “The UK Bank rate is forecast to start rising in spring 2010, as the Bank of England withdraws some of the monetary stimulus in order to minimise the risk of undesirable inflationary pressure in the medium term. The Bank rate is expected to reach 2 per cent by the end of next year, with no further rises during 2011, to assist the sustainability of the recovery as fiscal policy begins to tighten.”