Rising interest rates – Could they cause you to struggle with your mortgage repayments?
According to reports, a third of UK mortgage borrowers would struggle to cope financially if an increase in the current interest rates was introduced to their plans across the UK. Suggestions of increases to UK mortgage schemes have considered rising the figure by two percentage points.
A considerable 32% of people have said that they would struggle to keep up with the demand, with a further 39% of people saying they would also struggle in the south-east of England.
In recent weeks, the Bank of England once again voted to hold the current base rate at 0.5%, a historic low that’s been present for nearly six years. Although suggestions of an increase in interest rates have been snubbed by the Bank of England, Mark Carney, the Banks’ Governor, has admitted that an increase will be required at some point in order to raise the overall value of the housing market.
From a report undertaken by the ICM, 14% of people strongly agreed with suggestions that they would struggle to keep up with their payments if a rise were to take place. Another 18% indicated that they may also struggle. With these two percentages combined, a third of UK borrowers think they would struggle if a rise were to take place.
In recent months, it’s thought that 90% of new home loans taken out in the UK held a fixed rate. Unknowingly to the public, millions of borrowers are still on variable-rate mortgages, with some of these having clauses that allows the lender to change the conditions of the contract at their discretion.
Although, as suggested above, the likelihood is that rates aren’t set to rise anytime soon, only a small 14% of UK borrowers have suggested that they had made plans in their financial budget to deal with any adjustments that may come as a result of the inevitable rise. A flurry of competition in the mortgage market remains, so with the endless amount of deals now available to borrowers both current and prospective, the re-mortgaging rate in the UK has fallen in recent months.
The research undertaken by the ICM also found that a number of consumers are hoping that rates will rise in order for them to take advantage of the increase, gaining more from their savings in the process.
So, what do you think of our blog? Would you struggle if mortgage interest rates increase or are you an advocate of the inevitable increase to the housing market?
Let us know in the comments below.