Increase in interest rates could cause 1/3 of mortgage borrowers to struggle
2 minute read
The recent ICM Survey carried out, asked homeowners how far they agreed between 1 and 5 that a 2% increase in interest rates would mean they would “struggle” with their mortgage. This survey was conducted in light of the Bank of England once again voting to keep the base rate at 0.5%, which is where it has been for more than five and a half years. Although it looks unlikely that their will be an increase before the next General Election, the Governor of the Bank of England has indicated that at some point they will need to raise it, and will continue to until it reaches around 3%.
What did the survey indicate?
Across Britain as a whole, 14% indicated that they “strongly agreed’ that they would struggle with the increase, while 18% indicate that they may also struggle considerably. Overall 32% of borrowers are concerned how they would struggle with their mortgage repayments. Source What is concerning about this survey is that from April 2014 new regulation were put into place for Mortgage lenders and they had to put new applicants through the new affordability check. This should ensure that individuals wouldn’t be put into financial difficulty by having their mortgage.
Planning for the future
Despite the fact that rates will start to increase only 14% of respondent suggested to ICM that they have been making financial adjustments to deal with any rises that they might face. The mortgage market has become even more competitive in recent years, with many lenders cutting rates on new deals to attract customer. However, the amount of people that are mortgaging has fallen in recent months, which suggest that those on variable rate deals are staying put despite the intention to raise the base rate. Source Data Collection Disclaimer ICM Research interviewed an online sample of 2,050 respondents aged 18+ on 5-6 November 2014. Interviews were conducted across the country and the results have been weighted to the profile of all adults. ICM is a member of the British Polling Council and abides by its rules.