Half Of Borrowers Worried Over Loan Rate Increases
The Bank of England base rate of interest for home owner loans and mortgages has now remained at the record low level of just 0.5 per cent for fifteen months, making many people’s loan repayments the lowest they have ever been.
Due to the fact that many borrowers have become used to such cheap loan repayments, many are now taking this for granted and used the money they are saving each month to pay for other things, leading to concerns that they may not be able to afford any rate rises in the near future.
A recent survey, conducted by MarketGuard, has found that almost half of people with a home owner loan would have financial concerns if the cost of their loan were to increase through rate rises. A further 7 per cent of borrowers said that they simply would not be able to afford the loan repayments at all, if interest rates were to increase.
The majority of financial experts expect interest rates to increase over the course of the next twelve months and this is mirrored amongst borrowers with a home owner loan, 75 per cent of whom are anticipating rate rises of up to 2.5 per cent and 15 per cent expecting the interest rate on their loan to increase by more than 2.5 per cent.
Chris Taylor of MarketGuard said “This research underlines the extent of exposure the British public has to interest rate risk. It is clear that we face a major problem if rates start to move dramatically upwards in response to inflationary pressure.”
“Nearly half of the UK’s mortgage holders would feel the squeeze heavily and there can be little doubt that defaults and repossessions would increase. There are millions of mortgage holders in the UK who are unable to find a suitable fixed rate deal and so remain at the mercy of financial markets.”
