Recent research has suggested that many homeowners are concerned that they won’t be able to afford their mortgage repayments when interest rates rise.
The study questioned 2,000 UK mortgage borrowers.
With the base rate remaining at a low of 0.5% for the past six years, at least 1.85 million homeowners may have never experienced an interest rate rise at all.
The rate rise concern
Of those surveyed, over half said they thought a rise in interest rates would cause them to struggle or fall behind on their mortgage repayments – which could have devastating effects on their financial situation.
A further 1 in 10 anticipate experiencing real financial problems when there is a rate rise. 1 in 7 believe they’ll be able to manage their repayments but it would be a constant struggle.
A change in lifestyle
The research also aimed to identify the impact an interest rate rise would have on homeowners’ lifestyles, and found that just one in five believed a change would have no effect on their everyday life.
A quarter of those surveyed said they would have to cut back on non-essentials to accommodate an interest rate rise and worryingly 1 in 5 said they would have to cut back on essentials like food and clothing.
One in six said that they would have to look at working overtime or get a second job in order to be able to afford their mortgage. Nearly one in 20 people say they would consider borrowing money from another source.
Get it fixed
The Bank of England has warned borrowers that it expects to have to start increasing interest rates early next year. The actual timing of any increase will depend on inflation and wage growth, the wider UK economy and the global economic situation. In fact even the experts disagree on when they think the next interest rate rise might be.
Even so, if you’re concerned you won’t be able to continue to afford your mortgage repayments when interest rates go up you may wish to consider switching to a fixed-rate mortgage. If you do you’ll know exactly how much you’ll have to pay every month, during the fixed rate period (typically 2, 3, 5 or 10 years). It’s important to remember however that you must plan ahead and consider what will happen once the fixed rate term ends, as you your repayments could jump at that point.