UK mortgages payments set to increase by 2012

A report from the renowned Policy Exchange think tank, which we covered yesterday, has caught the attention of many consumers across the UK. The report suggests that UK base rates could increase to around 8% by 2012 as the Bank of England looks to fight off the potential threat of inflation. However, a by-product of this potential increase in UK base rates could be an average £900 a year increase in mortgage payments.

While there's some scepticism regarding the report by the Policy Exchange thinks tank there is also no doubt that the potential chain of events could happen. If the UK economy was to fall into a double dip recession the government would be forced to increase the supply of "cheap finance" which would then feed the monster which is inflation. The potential ramifications of an increase in inflation have been covered in great detail in recent weeks and are potentially damaging to say the least.

At this moment in time a potential increase in UK base rates to anywhere near 8% is only a forecast. However, the very fact that the credit crunch and resulting worldwide recession are "unique" to the vast majority of people living today makes the situation even more complicated.