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What would happen if interest rates went up?

It would have been hard to miss that interest rates have been at an historical low of 0.5% for some time but many are predicting that they will start to rise again from Spring 2016.  According to some new research carried out on behalf of mortgage and loans provider Ocean Finance almost seven million owners could struggle to cover their mortgage repayments if interest rates rose by just 1%.

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Enable’s experienced IFA’s of Bishop’s Stortford think that if they do rise they are unlikely to rise steeply, however, a rise of 1% would see many borrowers with standard variable rate mortgages having to pay an additional £55 a month for every £100,000 that they owe.  Once rates do start 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.”
The findings also indicated that almost a quarter of borrowers have already switched to fixed rate mortgage and a further 16% plan to take fixed rate mortgages to protect themselves against an imminent increase.

The research also suggests that the pressure to meet increased mortgage payments could force about 10% of home owners to consider selling their home to avoid the higher cost of their mortgage.
Gareth Shilton, Ocean’s spokesperson said, ‘It’s inevitable that interest rates will rise at some point, whether that happens in Spring next year or later in the year.’ he also pointed out, ‘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,’   To discuss any changes you might want to consider to your mortgage Enable’s IFAs in Bishop’s Stortford are happy to talk you through your options.

Your home may be repossessed if you do not keep up repayments on your mortgage.

Issued by: Enable Independent Financial Life Planners 
25c North Street, Bishops Stortford, Herts CM23 2LD
Telephone: 01279 755950 – Fax: 01279 657339
 Enable Independent Financial Life Planners is a trading style of Enable Independent Limited is authorised and regulated by the Financial Conduct Authority.
It is important always to seek independent financial advice before making any decision regarding your finances. If you would like any assistance, please contact us.

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