A third of UK mortgage borrowers would not be able to afford their repayments if they increased by £100 – £199 a month according to the latest Mortgage Mood survey by Legal & General Mortgage Club.
With 63% of consumers expecting interest rates to rise in 2015, many people could find themselves facing higher mortgage repayments in the near future. However despite these concerns, only 35% of people have prepared accordingly.
With interest rates having been at historic lows for the last five years many borrowers are comfortable with the conditions of their current deals. However, the latest Mortgage Mood data showed that a £100 – £199 rise in repayments would mean 35% of homeowners would struggle to make their repayments. The problem is particularly acute for older borrowers. 48% of 55 to 64 year olds said they would struggle with their repayments if they rose by up to £200 and more than half of those over 65 (54%) said they would struggle.
35% of borrowers say they have already prepared their finances for a rate rise. However 23% consumers said they would wait until the first base rate increase is announced to review their finances and another 20% will wait for the base rate to reach 1% before they act. 27% of respondents said that speaking to a broker would be the biggest catalyst to encourage them to review their finances.
Jeremy Duncombe, director at Legal & General Mortgage Club, said: “Our latest Mortgage Mood data suggests that many borrowers are not ready for an interest rate rise. The last time rates went up in the UK was in 2007 and although the base rate has been static at 0.5% for over five years, they will rise sooner rather than later.
“Waiting for rates to rise before you act might seem like a good idea to some but in reality the best deals won’t be available once rates have risen as lenders price in a rate increase well in advance.
“Perhaps the most encouraging aspect of the survey was that a quarter of people would be more likely to review their finances if they spoke to a broker. Talking these issues over with a broker is a great way to get advice about how to minimise the impact of an interest rate rise on your household.”