One in four will struggle with rate rise
As many as 39% of mortgage holders anticipate cutting their spending on holidays and eating out to cope with rate rises, while a fifth expect to cut back on essentials like clothing and food.
Paul Broadhead, head of mortgage policy at the Building Societies Association, said: “These results indicate the sensitivity of people’s monthly spending to changes in general household expenditure, indicating that as mortgage rates rise this could have a significant impact on economic recovery.
“Many consumers are only used to a low rate environment which will change and whilst most mortgage rates are not linked quite so directly to the base rate as they used to be, rates will rise as it increases.
“Our advice to those concerned about interest rate rises is to start thinking about how they will manage the increased costs.
“This could include creating a household budget, to taking a look at mortgage calculators and rescheduling unsecured loans such as credit cards.”
Despite the Governor of the Bank of England Mark Carney indicating that the long-term normal for base rates will be 3%, as many as 54% of mortgage borrowers expect the Bank to keep rates below 2% by mid-2017.
Joanna Elson, chief executive of the Money Advice Trust, added: “After all these years, mortgage payers are in for a big financial shock when interest rates begin to rise. For many, that shock will be too much to absorb – and there is a real risk that we will see a surge in unmanageable debt problems as a result.
“Our message to borrowers is clear – interest rates will rise and that day is coming soon, so now is the time to prepare. Draw up a budget, speak to your lender, and if you do find yourself struggling to repay, seek free debt advice as early as possible.”