25th September 2015
Over half of homeowners say they will struggle to pay their mortgage when interest rates rise.
Research by the Building Societies Association (BSA) shows 52% said they will struggle to pay and even fall behind with mortgage repayments when interest rates increase from their 0.5% low.
One in 10 said they would face real financial problems and 14% said they would be able to keep up with repayments but it would be a constant struggle. Almost a quarter of people said they would experience difficulty from time to time.
Interest rate rises will impact people’s lifestyles, with 18% of borrowers saying they will have to cut back on essentials such as food or clothing to make their repayments.
Another 15% said they will have to work more hours to keep on top of their mortgage.
Paul Broadhead, head of mortgage policy at BSA, said he had concerns about those borrowers who have never experienced a rate rise.
‘Concern from borrowers is natural when it comes to interest rate rises. There are at least 1.85 million homeowners that have never experienced a rate rise, we have a record low bank base for so long, it is unsurprising that some people are concerned that a rise in rates will affect their lifestyles and ability to make mortgage payments,’ he said.
‘Clearly some of the actions borrowers say they would take may not be within their control, for example working additional house. Our advice to those concerned about interest rate rises is to start thinking about how they will manage the increased cost. This could include creating a household budget, to taking a look at mortgage calculators and rescheduling unsecured loans such as credit cards. Free money advice is available for those that are concerned.’
Broadhead added that the good news from the survey is that 22% of people will not have to make any changes to their lifestyle to afford their mortgage when interest rates rise.
‘With the economy more stable than it has been for years, this is a positive result. That said, with inflation near zero and the monetary policy committee voting by a majority of eight to one to maintain the bank rate at 0.5%, it is looking unlikely that things will change before well into 2016,’ he said.