A 1% hike in interest rates would see borrowers with standard variable rate mortgages pay an additional £55 a month for every £100,000 owed. Interest rates were held at their historical low of 0.5% this month, although economists predict they will begin to climb from Spring 2016.
Once rates begin to rise, some 63% of borrowers say they would have to cut back on all non-essential spending, such as weekends away or even meals out, to cover the additional cost.
While many borrowers are able to reduce spending to cover the increased mortgage cost, a further 13% are concerned they would quickly get into financial difficulty trying to make ends meet.
Almost a quarter of borrowers have already switched to fixed-rate mortgages and a further 16% plan to take fixed-rate mortgages to protect themselves against a rate increase. Worryingly, more than a third of homeowners are not taking any steps to shield themselves, the survey shows.
The pressure to meet increased mortgage payments would force about 10% of homeowners to consider selling their home to avoid the higher cost of their mortgage.
Gareth Shilton, Ocean’s spokesperson, says: “It’s inevitable that interest rates will rise at some point, whether that happens in Spring next year or later in the year. Whilst the rate rise is likely to be gradual and it may take a while to get to a 1% increase, every rate hike will have an impact on hard working families who are already struggling to make ends meet.
Many people will feel like mortgage prisoners because their circumstances have changed since they took out their loan and they’ll understandably be concerned about what a potential interest rate rise means for them.
It’s important to understand that in most cases there are options, so it’s important that anyone who is concerned about a rate increase should seek advice on the best deal available to them.”
