Many borrowers will struggle
Almost 2 million borrowers have never seen a rate rise. Recent surveys show that many are concerned about meeting mortgage repayments and the impact that an increase in the monthly mortgage payment will have on their lives. Almost 20% suggest they will have to cut back and 15% say they will have to work more hours.
Over 50% of borrowers will struggle with a rise
A survey by Building Societies Association, of 2,000 homeowners, uncovered that over half of borrowers are expecting financial difficulties following any rise in the interest rate, as proposed by the Bank of England (BoE) in 2016.
10% expect serious financial problems and 14% are likely to still be able to meet repayments, but it will be on a knife edge.
18% of borrowers will have to reduce their other monthly outgoings, such as food or clothes, to be able to keep up their mortgage commitment and 15% will need to increase their working hours to earn more income to cover the additional interest.
Others will have to borrow money from elsewhere therefore increasing their debt, downsize to a smaller property and mortgage, or cancel major spending plans.
Only 22% will not need to make any changes.
Window of opportunity
The rates are expected to rise in 2016, although economists are predicting now that it may not be until later in the year. With inflation low there is less pressure on the BoE to increase rates.
Nothing is certain though so borrowers need to start focusing on how they will manage their finances when the time arises. Renters could also be affected as increased costs are passed onto tenants.
This is the window of opportunity to make the necessary plans before the rate increase is on the doorstep.
Dental & Medical Financial Services offer comprehensive financial advice on mortgages and investments and can give guidance on managing your finances in light of any rate rise. Call today for impartial and friendly advice.