Mervyn King Issues A Strong Warning To Borrowers

Although interest rates have been left at 0.5% for the past two years, Mervyn King has warned that things will be changing soon. The question of ‘When Exactly?’ is the real problem. Economists have made predictions for an interest rate rise ranging from May this year to early next year.

It is hoped that an interest rate rise would help combat inflation. There are worries that untamed inflation could result in higher wage demands and an escalating spiral of costs. The other problem is that those with savings are suffering at the moment due to record low interest rates leading to poor returns. An interest rate rise would cause problems for those with mortgages, but the fact is that those with savings outnumber those with mortgages by six to one.

It is important that those making long-term financial plans consider the potential for change in the markets over the coming years.

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