Around one in 10 mortgage customers have already fallen behind with current payments and a third would cut back on all non-essential spending to make ends meet, according to the survey from mortgage broker Ocean Finance.
With the Governor of the Bank of England Mark Carney recently suggesting that interest rates could start to rise over the next few months, almost half of mortgage borrowers, 46%, admit they would either definitely or potentially struggle if the interest rate on their home loan went up by 3%.
A 3% rise in interest rates would potentially mean borrowers with repayment mortgages paying an additional £150 a month for every £100,000 owed. UK home owners were asked how they would cope making the increased payments.
More than a third, 38%, said they would potentially struggle with the increase and would have to look at ways to save money and 7.9% revealed they would definitely have difficulties and would immediately seek to sell their property.
Just over one in three, 35%, of mortgage customers noted they would adjust their current budget so they could make sure they were still able to afford the payments. Only one in five claimed they would comfortably manage if the interest rate on their mortgage increased by 3%.
With the Bank of England base rate at a historic low of 0.5%, there are home owners who are already struggling to make their repayments. Asked to describe their ability to make their current mortgage payments, some 9.8% of home owners said they have had difficulty keeping up and have fallen behind. A further 19% claimed they are up to date but do struggle to pay their mortgage.
Should their mortgage rates increase by 3%, some home owners admitted they would have to take drastic measures to be able to maintain their payments with 37% saying they would cut back on all non-essential spending, and 33% saying they would reduce all their non-priority spending as well as some essential spending.
Meanwhile, 11% of mortgage holders said they would work more hours so that they could afford their increased repayments and still maintain their current lifestyle. Only 22% said they did not think they would have to make any cut backs.
‘Clearly it is likely to take a while for rates to rise by 3%. But if they do go up by that much over the next couple of years it’s worrying to hear that nearly half of mortgage borrowers are concerned about how they would keep up with the repayments, especially when one in 10 are already behind with their payments,’ said Ian Williams, spokesman for Ocean Finance.
‘If home owners are currently on a variable rate or tracker mortgage and are concerned about how rate increases might affect them, they could seek out professional advice to find out if switching to a fixed rate mortgage could be beneficial,’ he added.
