Rate rise ‘could increase number of repossessions’

Citizens Advice states that the 0.25 per cent increase, which has surprised many analysts, might cause increased numbers of homeowners to fall behind with their mortgage repayments.

Peter Tutton, policy officer at Citizens Advice, said that several hikes in a short time period “could hit some homeowners hard”.

He added: “We are already seeing a rapidly growing number of people falling behind with mortgage payments and in some cases threatened with repossession and we know some people are taking on mortgages that stretch them to the absolute limit.”

Mr Tutton continued that any increase in mortgage interest rates might be a “disaster” for those whose finances are tipped on the edge of affordability.

A Reuters poll conducted before the Bank of England’s announcement showed that only one of 50 respondents believed that the base rate would be increased in February.

Although analysts predicted a rate hike, many thought that the bank would wait until February before making such a decision.