THE chief executive of a Leeds-based financial institution believes that interest rates will stay as they are into next year but that the economy will remain “tough”.
He says times will be hard for borrowers and that there will be low growth.
Peter Hill, boss of Leeds Building Society, pictured, is also concerned that there could be “ripple effects” for the UK if the eurozone crisis gets worse and more countries succumb to the same problems as Greece.
The Society revealed a record operating profit of £102.4m earlier this week and said it had gained 58,000 new members in the last year.
Mr Hill told the YEP: “I think there is every possibility that borrowers in general will have quite a tough time.
“We have gained a fair bit of experience in the last few years with borrowers and our first responsibility is to help them get by.”
He said that the Society has seen customers in arrears because of financial difficulties caused by factors such as unemployment, low or zero wage increases and cuts by the Government, but Mr Hill believes that the low interest rates in the UK at present have helped by keeping mortgages more affordable for most people.
He said: “I do not think we will see interest rates go up, certainly not in 2012, certainly not in 2013”.
But Mr Hill believes there will be “pressure” late next year to see them rise.
He said: “All of the indicators are that when rates start to rise they rise slowly and gradually over time.
“Fairly low growth over quite a long period of time will probably set the scene for a gradual rise in interest rates over quite a while.
“However, in my experience, and I’ve been in financial services over 30 years, when rates start to move they start to move more quickly than the indicators show.
“In the long term, interest rates around the four per centish rate will probably make sense and be a good sign.”
Mr Hill said that he supported the government’s attempts to slash the country’s deficit because it was important for the UK to have a good credit rating for lending cheaply.
He said: “I know one of the things that is very important to us as a business is our credit rating so we can have access to funding. The UK has got the strongest credit rating in the world and because of that the UK government has got access to low cost funding.
“The public debt is very high so being able to borrow very cheaply is a good thing for the UK.”
Mr Hill was concerned that any development of the eurozone crisis which saw debt problems arise in other EU countries like Portugal, Spain, Italy and Ireland could have a “ripple effect” on the UK economy, but admitted that it was hard to predict the future because of uncertainty over the issue. He said: “I don’t think anyone knows what the ripple effect is.”
Mr Hill said that the Leeds Building Society had “no exposure to the sovereign debt” in countries using the euro.