A large proportion of borrowers have admitted they will struggle to make mortgage repayments if interest rates rise further – raising concerns about the consequences of further base rate hikes.
The Bank of England (BoE) is expected to increase interest rates by 0.75% to 2.25% on Thursday – a move which will mean the cost of mortgages will climb too.
This will be the seventh consecutive hike to the base rate since December 2021 and it would seem borrowers are now really starting to feel the pressure of these decisions.
Indeed, in survey of 2,000 people by Anthony Ward Thomas removals, 25% of borrowers admitted they would struggle with their mortgage repayments if interest rates were to hit 5%.
Meanwhile, a study by Butterfields Mortgages of 2,000 adults found a third of mortgage holders felt the interest rate hikes over the past year had make their repayments unaffordable. For those aged 18 to 24 this proportion increased to 48%.
Anthony Ward Thomas, founder of Anthony Ward Thomas removals, said: “The soaring cost of living is a growing concern.
“Interest rates are rising as the Bank [of England] tries to control runaway inflation and borrowers are clearly worried as to just how high they will have to go.
“Throw in higher energy, fuel and food bills on top of greater mortgage costs and it is no surprise that people are increasingly uneasy.’”
Some borrowers ‘more worried’ about interest rate hikes than inflation
A 0.75% hike to rates would have an immediate impact on those with variable rate mortgages and tracker deals.
Anyone with a fixed rate deal will be protected from rate rises until their mortgage expires – this is when they will start to feel the impact of rate rises. Indeed, lenders are factoring in the BoE rate hikes to their fixed-rate mortgages and prices are climbing as a result.
Butterfield Mortgages’ research showed rising rates topped many mortgage customers’ financial concerns – 44% said they were more worried about rates than inflation.
A similar number (42%) said they were considering switching to a different mortgage provider offering a longer fixed-term mortgage.
Over half of UK mortgage customers (53%) felt locked in with their current mortgage provider, while more than a quarter (27%) are actively shopping around for a new mortgage.
Alpa Bhakta, CEO of Butterfield Mortgages, said: “Borrowers are facing sharp shifts in the economic landscape.
“Our research has shown the extent to which six consecutive interest rate hikes by the Bank of England have impacted mortgage repayments and people’s wider financial concerns.
“As lenders, we must do everything we can to help mortgage customers navigate the best possible financial path through these mounting challenges.”
