Thousands face crisis if mortgage rates increase

March 24, 2016 by Brendan O'Neill

Rates

According to a recent report, 20% of mortgage holders would face financial difficulties if interest rates were to rise.

Whilst one person in five would have to cut back so they could manage, one in 14 would have serious difficulties coping. Nationwide Mortgages surveyed 2,000 homeowners, discovering that 50% of recipients were funding their everyday costs with an overdraft or credit cards. This included the cost of food. One in five said that they would have to make cutbacks if the interest rates increased at all, while 7% would be in serious trouble.

Almost 20% didn’t have an emergency fund to rely on if interest rates rose, or they had financial problems. The report was released following an announcement by the Bank of England to maintain the low base rate, currently at 0.5%. The Bank of England base rate has been at record lows for the last seven years, which means that some home owners will never have experienced an increase in mortgage interest rates.

Over two million first time buyers have become property owners while the interest rates have been at their lowest levels. The report also stated that 10% of people had no idea how the interest rates worked and they didn’t want to know.

The low cost of borrowing had been maximised by 39% of homeowners, who had overpaid their mortgages to lower their debts, while 6% had used the spare cash to spend on treats. Mortgage advisers are CeMAP qualified and can offer advice about all areas of a mortgage, including overpaying while interest rates are so low.