Borrowers should start planning for a rise in interest rates now, the head of mortgage policy at the Building Societies Association has warned.
Paul Broadhead said interest rates have been low for so long that there are at least 1.85m homeowners who have never experienced a rate rise.
He said: “It is unsurprising that some people are concerned that a rise in rates will affect their lifestyles and ability to make mortgage repayments.
“Our advice to those concerned about interest rate rises is to start thinking about how they will manage the increased costs.
“This could include creating a household budget, to taking a look at mortgage calculators and rescheduling unsecured loans such as credit cards.”
Research by the BSA found more than half of borrowers say they will struggle or fall behind with mortgage repayments when interest rates rise.
The survey has revealed that one-tenth would experience real financial problems, while 14 per cent said they would be able keep up with repayments, but it would be a constant struggle.
A quarter of people said they would experience difficulty from time to time.
Bank of England governor Mark Carney has predicted rates will begin rising gradually in the second quarter of 2016.
Joanna Elson, chief executive of the Money Advice Trust, said: “After years of low rates, borrowers’ minds are beginning to focus on the prospect of higher interest rates, and what this will mean for their finances.
“Nevertheless, many mortgage-payers are still in for a big financial shock when rates do start to climb – and we remain concerned that many will fall into problem debt as a result.
“Households now have a window of opportunity to re-assess their budgets, look again at their borrowing and think about how they will cope with higher interest rates.”
Adviser view
Ashley France, mortgage adviser with Cheshire-based Ark Financial Planning, said: “We have got a couple of clients who are on base rate trackers, but we have not heard murmerings from anyone who is concerned.
“It may be an issue that people are not fully aware of how it could affect them.”
