MortgagesOct 22 2014

Fears over interest rate hike impact on mortgages

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While the chances of an imminent interest rate hike may have receded, Halifax research has found many borrowers remain concerned about the impact a rise could have on their monthly mortgage repayments over the next 12 months.

Earlier this month the Bank of England’s Monetary Policy Committee voted to maintain bank rate at 0.5 per cent, keeping it at this record low since 5 March 2009.

A combination of lower than expected UK inflation figures and weaker global economic forecasts have postponed any increase for now, but around 43 per cent of homeowners said they remain concerned about the impact an interest rate rise would have on their monthly repayments.

Ipsos Mori conducted two waves of interviews with UK mortgage holders, with the most recent wave taking place between 5 September and 2 October 2014, with 1,121 mortgage holders interviewed. The first wave, took place between 4 and 21 July, with 1,090 mortgage holders interviewed.

Those most likely to be concerned about an interest rate rise are those aged 35-44 (54 per cent), those living in London (55 per cent) and those with a variable rate mortgage (52 per cent).

Craig McKinlay, mortgages director at Halifax, said: “As the likelihood of the MPC voting for an interest rate rise early next year recedes, the research shows some homeowners remain concerned about the effect on their monthly mortgage repayments.”

“Nationally, a quarter of mortgage holders reported they would find it difficult to afford their mortgage repayments if the monthly payment was to increase by between £75 and £149. However, 20 per cent said they would have no difficulties with any increase in their monthly mortgage payment.

“If their mortgage payment was £100 higher, a third of mortgage holders reported they would have to reduce spending on everyday essential items such as food, energy, and clothing.”

peter.walker@ft.com