Rate rise would push FTBs into arrears
A 1.5% increase would see mortgage payments increase by £1,236 per year for a typical first-time buyer with a 25-year mortgage taken in 2014, while the percentage of income spent on mortgage costs would rise from 19.40% to 25.08%.
HML based the prediction on the last time rates increased between 2005 and 2007, when 6.58% of first-time buyers suffered arrears within the first three years of the mortgage, compared to 1.99% for remortgaging customers.
Damian Riley, director of business intelligence at HML, said: “These trends show a particularly worrying pattern for FTBs who have not factored future interest rate rises into their budgets.
“Historically, we have seen that they are more exposed to worsening economic factors, with our data showing the impact of the credit crunch on this demographic.”