A recent study by Equifax indicated that 78 per cent of people with a variable rate mortgage had failed to budget for possible interest rate increases, despite 80 per cent believing that the rates would rise within the next year.

As experts believe that there will be an increase in interest rates as soon as the start of 2016, the focus is now on those who have variable rate mortgages, possibly facing significant payment increases. Although the impact of interest rate increases will depend on the size of the mortgage and any spare money in the household finances, this will be the first increase in the base rate since 2007, which many homeowners won’t have experienced.

The study also revealed that almost a third of home owners didn’t know how much their payments would increase by if the interest rates rose by 0.5 per cent. Knowing this may influence your decision on switching to a fixed rate deal if the household finances are already stretched. As there are various deals available, all at different rates, some with fees and some without, it is worthwhile spending time with a financial adviser who can help you make the best decision for your circumstances. As advisers are CeMAP trained, they are in a position to help you sort through the myriad of offers available.

Respondents of the survey said that they would cut back on food shopping and holidays in order to afford the extra monthly payment as a result of an interest rate increase.

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