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Variable-rate home loan customers at risk of interest rate rises

By Nicholas Boyle - Financial specialist

4 January2011

According to an article published in The Guardian, variable-rate home loan customers are at risk of interest rate rises.

The Bank of England has said that in total, the percentage of borrowers with a variable-rate loan has increased to two thirds - much higher than the recent five-year average of about 50%.

The Bank also warned that homeowners `need to prepare for a series of interest rate rises to about 5%`, and as the Guardian reports, if interest rates do rise to this level, homeowners would `need to reduce their debts by 15% to bring the proportion of disposable income spent on repaying their mortgages down to the long-term average`.

The interest rates on variable-rate home loans are set by the lender - and as a loans expert at Think Money said: "the interest rates on many variable-rate deals are likely to increase in line with the Bank`s base rate.

"However," the spokesperson continued, "it is up to the individual lender as to how much the interest rate will go up - and when."

Tags: home loan, variable, variable rate

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