UK mortgage debts won't be affected by rising interest rates

January 10, 2016 by Brendan

Rates

According to a study by Savills estate agents, the majority of UK households won’t struggle to pay their mortgage when the Bank of England increases the base rate.

The analysis reveals that most of the borrowers who have a variable rate product will face an average increase of £300 a year or less, when the base rate is eventually raised from the current 0.5%. During 2016, experts are expecting the Bank of England to announce the first increase to base rates in seven years. For households which have a mortgage attached to the base rate, their monthly payments are likely to increase.

However, the governor of the Bank of England, https://www.beaconfinancialtraining.co.uk/wp-content/uploads/2020/06/cemap-online-and-classroom-training-uk.jpg Carney, has stated that the base rate will be increased slowly, with just one rate increase in 2016 and just two more increases before the end of 2018. Following all three increases, the base rate is expected to be 1.25%, which is still much lower than the 1.8% which would be needed to inflate the cost of a variable rate mortgage to levels before the crisis. According to the director of residential research at Savills, Lucian Cook, the increases to interest rates will probably slow down rising property prices, rather than result in mortgage arrears.

The new affordability regulations have been credited with placing borrowers in a strong position to be able to deal with interest rate increases. Taking advice from CeMAP qualified mortgage advisers will also ensure that borrowers are prepared for any increase in payments.