Households are bracing themselves for the first rise in borrowing costs since the Bank of
Thursday's warning from
The Bank slashed interest rates to an all-time low of 0.5% in
But in a hardening of his position, Carney told the City that rates could now rise sooner than expected. Economists are pencilling in the first increase before the end of this year.
"The Bank is at pains to say that when rates do start to move it will be gradual, so we should see a continuation of the drift upwards, but there might be an initial rush of deals disappearing."
The average rate for a five-year fixed rate mortgage has risen to 4.17% from 3.88% in the past year, figures from Moneyfacts show.
Hollingworth said borrowers on variable rates who have been thinking of fixing should move quickly because deals will be withdrawn long before the Bank orders the first increase. People on ultra-low variable rates may want to delay fixing and take advantage of their current deal, he said.
"You should ask: 'If rates have gone up to 2.5% or 3% how does that feel?' But in the meantime you could be overpaying to make low rates work even harder and improve your position for when we are in a higher rate environment," he said.
Many borrowers would not have been able to stay in their homes without the Bank's rate cuts. In the previous housing crash in 1991 there were 75,000 repossessions in a year. This time the number hit 50,000 in 2009 before falling back quickly. Last year there were 29,000, despite the squeeze on household incomes.
The Bank's financial policy committee is monitoring the potential effect of rising interest rates on the housing market.
Campaign groups such as Citizens Advice have warned that many households will struggle to pay their mortgages after even a small rise in interest rates, because high living costs have left them little room for manoeuvre. They also warn that higher borrowing costs will come as a shock after more than five years of near-zero rates.
As borrowers have benefited from low rates, savers have been hit badly and their returns have failed to keep pace with the increased cost of living. The average two-year fixed savings rate has fallen from an already low 1.93% to 1.75% in the past year.
Rising interest rates could bring relief for savers in the long run but they should not expect markedly better returns soon.
On top of low official interest rates, savers have been hit by the Bank's Funding for Lending scheme. Launched in
Carney's speech was good news for holidaymakers, at least for now. The pound reached a more than five-year high against a basket of currencies and edged close to a five-year high against the US dollar at
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