For nearly two years many homeowners on variable rate mortgages have revelled in the fact that the base interest rate has fallen to an all time low, having dropped to just 0.5 percent in the first quarter of 2008. The drop in the base rate meant that many people saw their monthly repayments plunge, leaving them with more disposable income and enabling them to dodge the risk of losing their property through being unable to meet their repayments.

Over the past couple of years people have used the extra money that they have saved on their repayments for a variety of things, from bumping up their savings or paying off debts and mortgage balances to treating themselves to some luxuries. However, nobody knows how long this low rate of interest will last, and some are speculating that it could come to an end in the near future, with many predicting that interest rates will increase this year.

This leaves consumers in a difficult position. On one hand they the interest rate could stay at this record low for some time to come, enabling the average homeowners to enjoy having more money and make plans for using the money to maximum effect. On the other hand the fact that interest rates could suddenly increase means that consumers have to be prepared and need to ensure that they will be able to afford the repayments.

The problem comes for those with fairly hefty mortgages, as even a relatively small increase in interest rates could make a difference of hundreds of pounds a month, which many may find difficult to get their hands on. This could quickly lead to missed repayments, and ultimately to repossession.

One solution for homeowners who do not feel that they would be able to cope with an interest rate increase would be do look at switching to a fixed rate mortgages, where the interest rate and repayments would remain fixed for a specified period of time, enabling homeowners to enjoy increased peace of mind and stability with their finances. However, this does mean that as long as the base rate stays at this low you will usually be paying more than those on variable rate mortgages.

With an interest rate increase likely over the coming months, based on predictions from industry experts, it is well worth thinking about whether you could cope with a rate rise should it take place, and if not look at the various options open to you.