Homeowners will be hard-hit by interest rate rise
There could be a sharp rise in the number of properties coming onto the market for sale when the Bank of England (BoE) finally decides to raise interest rates, according to a new study.
Research conducted by mortgage broker Ocean Finance found that close to one in 10 home owners plan to sell up if interest rates rise and a third say they will potentially struggle.
Some 10 per cent of mortgage customers have already fallen behind with current payments and a third would cut back on all non-essential spending to make ends meet, the survey revealed.
With the Governor of the Bank of England, Mark Carney (left), recently insisting that interest rates could start to increase from their existing record low level of 0.5 per cent, over the next few months, almost half of mortgage borrowers - 46 per cent - admit they would either definitely or potentially struggle if the interest rate on their property went up by 3 per cent.
A 3 per cent increase in interest rates would potentially mean borrowers with repayment mortgages paying an additional £150 a month for every £100,000 owed. UK home owners were asked how they would cope making the increased payments.
“Clearly it is likely to take a while for rates to rise by three per cent. But if they do go up by that much over the next couple of years it’s worrying to hear that nearly half of mortgage borrowers are concerned about how they would keep up with the repayments, especially when one in ten are already behind with their payments,’ said Ian Williams, Spokesman for Ocean Finance.
“If home owners are currently on a variable rate or tracker mortgage and are concerned about how rate increases might affect them, they could seek out professional advice to find out if switching to a fixed rate mortgage could be beneficial,” he added.
Although there is mounting speculation that interest rates will start to rise soon, opinion is divided as to when this will happen. But new research from the Intermediary Mortgage Lenders Association (IMLA) shows that most lenders expect to see an interest rate rise in early 2015 and not before.
The consensus among lenders is that the Bank of England will increase its base rate from 0.5 per cent in the first half of 2015, with 72 per cent projecting that this will happen, including 44 per cent who expect to see a rise in the first three months of 2015.