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Homeowners told to prepare for increased mortgage rates


Mortgage rates “will rise at some stage” and borrowers should be planning their finances for this eventuality, according to the Council of Mortgage Lenders (CML).

During the second quarter of the year, home repossessions fell to the lowest level since quarterly records began in 2008. However, those who still have money left to repay on their mortgage should be careful they don’t fall into trouble when the Bank of England inevitably increases interest rates.

Mortgage rates are usually linked to the Bank of England’s base interest rate, which has been set at a benchmark low of 0.5% in recent years, meaning mortgage repayments have generally been more affordable.

However, when interest rates eventually increase, so will the cost of borrowing – meaning mortgage repayments will become more expensive.

Paul Smee, general director of the CML welcomed plans for interest rates to be increased, as long as the Bank of England takes “baby steps” that are matched to “a careful assessment of the ability of households to deal with higher borrowing costs”.

He continued to advise that “any borrower anticipating payment problems should talk to their lender as soon as possible."

Evictions from rented homes increasing

Whilst the number of homes being repossessed has fallen, there have been an increased number of tenants being enrolled onto the eviction process by landlords.

Landlord possession claims have been increasing in recent years, and figures published by the Ministry of Justice revealed that there were 38,509 landlord possession claims in the second quarter of 2014.

A ‘landlord possession claim’ is the first stage of a tenant being evicted from a rented property, something that can be a very stressful experience.

Campbell Robb, from the housing charity Shelter said: "Each one of these will have had their lives turned upside down by this experience, as they faced seeing their home, the foundation of their life, ripped away from underneath them."

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