Mortgages 'will be subject to interest rate rise'

Interest rates on mortgages are likely to go up in the near future, an expert believes.

Mortgage products in the UK are likely to be subject to a rise in interest rates in the near future, an expert has said.

According to Timothy Lambert, head of consulting at London-based firm Ducalian, the sector will see interest rates go up, while home credit packages such as tracker mortgages that are cheap in price will be short-term as the wider economy continues its recovery following the global downturn.

Mr Lambert was speaking after the publication of data by Sainsbury's Home Insurance yesterday (November 15th 2010), which found that the cost of running a residential property across the country has dropped by around 14 per cent over the previous two years.

This is the equivalent of the average home now costing £155 weekly, or £8,059 a year, which represents a figure around £1,300 less than that seen in 2008.

Sainsbury's explained this statistic was primarily down to the fact that mortgage repayments have fallen in price throughout the same period, as they account for around 43 per cent of all household expenditure.

Therefore, borrowers are spending around 28 per cent less on home credit products than they were at the corresponding time two years ago, just as the recession was beginning to take effect.

Mr Lambert stated that while many people will be surprised at these figures, the reduction in overall living costs can be attributed to factors such as several local authorities freezing their council tax charges.

The expert went on to say that certain boroughs, such as Hammersmith & Fulham, have even cut their council tax in recent times.

However, he added: "The main reason is that mortgages for many are currently cheap. This vastly sways the figures but rates will rise over the course of the next few years as interest rates rise and cheaper products that run for a fixed period are coming to an end."