Adam Blackwell

Interest Rates to Skyrocket by 2012?

Economists are warning that mortgage holders in the United Kingdom could be facing a massive interest rate hike of up to eight percent within the next two years.

A new report from the influential Policy Exchange think tank released over the weekend, suggests that interest rates could be set to skyrocket by 2012. Chief economist Andrew Lilico believes that the United Kingdom will enter a double dip recession early in 2011, followed by a boom shortly thereafter - but that the boom itself will lead to massive inflation, resulting in a massive increase in mortgage rates by the following year. This could potentially lead to many losing their homes.

"To keep inflation down to ten percent for one year, the economy will have to be able to tolerate interest rates of perhaps ten percent," Lilico states. "There is a risk that the economy will not be able to tolerate eight percent interest rates without the mass defaulting on mortgages that we are trying to avoid."

Lilico's comments predict a scenario eerily similar to that of the massive interest rate hike in the late 1980s and early 1990s, which also occurred under a Tory government.

Money guru Jonathan Davis, from Jonathan Davis Wealth Management Ltd alarmingly agrees with Lilico's general prediction, but believes the full scenario and interest rate rises are unlikely to occur quite so soon.

"I do not believe his timescale of the next two years is accurate," Davis says. "I do not expect it to happen until... 2014."

This article is not intended and does not in any way provide advice. If you require professional Independent, whole of market mortgage advice you must speak to a qualified mortgage broker.

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