Homeowners unprepared for interest rate rise
03/06/2015
Research from Ocean Finances has shown that 13% of people would quickly get into debt to cover their mortgage payments if interest rates rise by just 1% in the near future.
Almost 7 million people would struggle to pay the additional £55 a month per £100,000 owed if base interest rates were to rise by 1%. 63% of borrowers have claimed that they would have to cut back on all non-essential spending, and 13% are concerned they would quickly get into financial difficulty. Worryingly, around 10% of homeowners said they would consider selling their home to avoid higher mortgage costs.
A quarter of homeowners have already made the transition to fixed-rate mortgages and 16% of people are planning to make the change soon. Over a third of homeowners have yet to take any steps to protect themselves if the interest rate rises.
Economists predict that interest rates will start to rise from Spring 2016.
Gareth Shilton from Ocean Finance said:
“It’s inevitable that interest rates will rise at some point, whether that happens in Spring next year or later in the year. Whilst the rate rise is likely to be gradual and it may take a while to get to a 1% increase, every rate hike will have an impact on hard working families who are already struggling to make ends meet.
"Many people will feel like mortgage prisoners because their circumstances have changed since they took out their loan and they’ll understandably be concerned about what a potential interest rate rise means for them.
"It’s important to understand that in most cases there are options, so it’s important that anyone who is concerned about a rate increase should seek advice on the best deal available to them.”
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