Impending rise in interest rate could cause debt management problems

As economic recovery looms, homeowners paying low interest rates on their mortgages may soon be blindsided by massive rises, David Kuo, director at financial advice website fool.co.uk has warned.

Offering a lesson in debt management, he said that when it comes to interest rates, what goes down must come up – and you must be ready.

"People on tracker mortgages … haven't been prudent enough to carry on paying what they were paying before [the drop in the rates]," he explained.

Mr Kuo reminded that those who have benefitted from the lower rates had not reduced their debts.

"When the interest rate goes back up again these people will suddenly be inundated with massive increases in their monthly mortgage repayments," he added.

His advice was to keep paying the same rate irrespective of drops so when the interest goes back up it does not "hit you like a rock".

Earlier this month, the Bank of England announced a base rate of 0.5 per cent, which is the lowest ever.