A new survey suggests that the majority of homeowners will have to make adjustments to their monthly outgoings when interest rates rise, and some will…
A new survey suggests that the majority of homeowners will have to make adjustments to their monthly outgoings when interest rates rise, and some will be left struggling financially.
Research published by the Building Societies Association and the Money Advice Trust revealed that over one-quarter (27 per cent) of the 2,316 mortgage holders questioned will be in financial strife following rate rises.
A further one-fifth of respondents said they would be forced to cut back on essentials such as food and clothing as a result. Some 39 per cent said they will have to spend less on holidays and eating out to raise enough funds to foot the bill for increased mortgage payments.
Paul Broadhead, head of mortgage policy at the Building Societies Association, said: "These results indicate the sensitivity of people's monthly spending to changes in general household expenditure, indicating that as mortgage rates rise, this could have a significant impact on economic recovery."
Mr Broadhead went on to advise homeowners to think about introducing a household budget if they don't have one already. He also hinted that people should look at rescheduling unsecured loans.
He suggested that it may also be a good idea to check out mortgage calculators to see how much mortgage repayments would be when rates rise.
Mr Broadhead went on to state that people are used to a low rate of interest and it seems that there is some confusion over how much of an increase there will be.
While more than half of respondents (54 per cent) said they believed the Bank of England's official rate will rise to just two per cent or below by mid-2017, official estimates are higher.
Governor of the Bank of England Mark Carney has indicated that the Monetary Policy Committee expect that the rate is likely to increase over the next three years to 2.5 per cent.