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How Will Interest Rates Impact on Mortgages?

How Will Interest Rates Impact on Mortgages?

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Need I state the obvious, but an increase in interest rates means and an increase in mortgage payments. The historically low rates means that most mortgagees have had the luxury of the extra pound or two in their wallets, but when will we all feel the squeeze again?

The rate at which the economy has been growing and the level of investment going into industry has expanded at a greater rate than was expected.  An estimated 800,000 home mortgagees are in threat of not meeting their repayments. This affordability will only lead to debt misery and repossessions.

Rates have remained at the historical low of 0.5{ae7d4a37e988fa9ad92085a62b0a24bc9a95d8c563a676ca97eb82441adb386a} since 2009 – an increase will mean that lenders will pass on through their Standard Variable Rate – leaving home owners trapped in their mortgages.  At present home owners are spending more than a third of their net incomes on servicing their debts. An increase will only challenge the existing ratios and lead people in further into debt.

Mark Carney, the Governor of the Bank of England has commented on rises in household debt would tip the British Economy and rate rises would be gradual.

“The Bank is well aware that a prolonged period of historically low interest rates could encourage other risks to develop. In the UK, the biggest risks are associated with the housing market,” he said in Glasgow at the Commonwealth Games

So what do we do about this?

Start doing you own ‘Mortgage Affordability Test”. Just type in your loan, the interest rate, and term of the loan – it will give you and idea of potential costs over the years.

[mlcalc calculator="mortgage" size="wide" price="125,000" rate="0.5" language="en" currency="gbp"]

 

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