Homeowners’ Finances Unable to Meet a Base Rate Rise
Research shows 42 percent of homeowners are worried about meeting their mortgage repayments when the base rate eventually rises.
The Bank of England announced yesterday their decision to keep the base rate at 0.5 percent, marking two years since it has been held at this record low.
Moneysupermarket revealed however that those with debt commitments will be unable to cope when this rises as their finances are already stretched.
If the base rate was to rise by 0.5 percent, homeowners could experience a £44 per month jump in their mortgage payments with those on a £150,000 variable repayment mortgage on 4.74 percent SVR.
“Borrowers need to be aware that a rise of even 0.5 percent will have a big impact on monthly expenditure, especially with family finances being stretched to breaking point,” said Kevin Mountford, Moneysupermarket’s head of banking.
“When rates rise, which they will do sooner rather than later, many people will find they don’t have the spare cash to fund the increases in their monthly payments.”
A worrying 17 percent of borrowers admit they will not be able to afford their mortgage when the rate rises, and a further six percent have already put their house on the market to prevent falling into debt in preparation of not being able to afford their repayments.
Statistics from Credit Action reveals household debt is still rising, with the average standing at £57,635 including mortgages in February.
The CAB deal with 8,004 new debt problems each day, a decrease from 9,389, suggesting those who are in debt are not able to pay it off.
If you are worried your budget will not cope with a base rate rise, think about using a prepaid credit card to prevent you from overspending. You may find a strict budget could prevent you from falling into debt.