Recent indications are showing that interest rates will rise at the end of 2015 as the UK economy continues to show signs of improvement.
This shift in interest rates would be welcomed by savers who have had a lean time over the last few years. Having reached a peak of 5.75% in July 2007, rates rapidly plummeted to an all-time low of 0.5% in March 2009, where they have remained ever since.
Conversely higher interest rates can spell bad news for borrowers, however the Bank of England has recently said that the majority of people with mortgages could cope with this rise in interest rates.
Just 4% of mortgage holders would need to take action if interest rates rose to 2.5% from their current 0.5% historic low, according to the Bank’s annual survey of household finances. However, the calculation assumes a 10% rise in household incomes.
If incomes did not rise, it said, 37% more mortgagers would need to act in response to a rate rise.
A recent survey from mortgage lender Halifax also stated that 30% of mortgage holders felt they would have to cut spending on essential items such as food, energy or insurance if their monthly payment rose by £100 per month.
When looking at a mortgage everyone should assess if they can both afford the mortgage payments now and whether they can afford the repayments in an environment of rising interest rates. One way to combat any these interest rate rises is to look at a fixed rate mortgage and current deals are still showing competitive rates, however, you need to be aware that when your deal comes to an end the rates may be much higher than where you started.
To discuss this further with our mortgage advisers in Southampton and the current fixed rates, or how you can make sure you can afford your mortgage if interest rates do rise, call our mortgage advisers on 0800 612 8099 or contact us here