A recent survey by ICM Research has revealed how a third of those paying back mortgages are facing the reality of finding it hard to continue making monthly payments if interest rates were to go up. According to the research, those who took part were asked how they would cope if rates were to increase by 2%. They were given a scale of one to five, with one representing a strong disagreement and five representing a strong agreement.
One-third chose either four or five on the scale
Just over 2,000 people voiced their opinions as part of the survey. Of these, 14% strongly agreed they would struggle if this rise in interest rates was to occur. A further 18% were just one step behind, rating their situation as four out of five on the scale. In total this means 32% of those questioned would struggle to some extent given a rise of just two percentage points.
A further 32% of borrowers chose three on the scale of one to five. Only 18% of those questioned strongly disagreed they might struggle with a 2% rise, while a further 18% mildly disagreed.
Base rate stays at 0.5% for the moment at least
These mortgage holders will be glad to hear the base rate is unchanged once again, although it remains to be seen how long this will last for. Some experts believe there will not be a rise, however small, until after the 2015 General Election. The Bank of England Governor Mark Carney has suggested rates will begin to rise eventually. When this happens they are likely to continue in an upward direction until they get to somewhere around 3%. It is further thought that rate rises of 0.25% a time would be seen when they do finally happen.
Changes in mortgage holder opinions across the country
While the figures above relate to the country as a whole, the research from ICM pointed to significant differences in separate parts of the country. Perhaps not surprisingly the south-east recorded the highest number of people who strongly agreed they would struggle to make their mortgage payments if rates rose. Here the percentage was 39%, some 7% higher than the national average.
Only 5% are making plans to accommodate rate rises
Another part of the survey asked people if they were preparing for potential rises in interest rates. Here just 5% strongly agreed they were. Meanwhile 36% strongly disagreed with this statement, although this could be down to a number of reasons. For example people who are on fixed-rate mortgages will be secure in the amount they are paying, possibly for several years’ into the future. Therefore this figure has to be taken more casually.
If one thing arises from this research it is this – many people who currently have mortgages are likely to run into difficulties with payments if they do not start making plans now to help them cope with a rise. It is not a question of if they will rise but when.