A report has shown that one in five mortgage holders would be forced to make spending cutbacks if interest rates started rising. While one in 14 would seriously struggle to cope. Acumen looks at the impact a base rate hike could have on homeowners.
A recent survey by Nationwide mortgages shows that half of all interviewees are already using credit cards to fund their basic needs and 7% said they would struggle if interest rates increased at all. Furthermore, 18% of the 2,000 surveyed homeowners admitted to not having any emergency funds for a rainy day.
Are record low mortgage rates about to end?
Mortgage rates have fallen to a record low while the base rate has remained at 0.5% for the last seven years, keeping borrowing costs relatively cheap for home owners. If the Bank of England decided to increase interest rates, it would be a whole new experience for many first time homeowners who have enjoyed ultra-low interest rates for so long.
During this extended period of ultra-low interest rates, an encouraging 39% of people surveyed said that they had used the cheap cost of borrowing to overpay their mortgages and clear debts. Another 6% of people used the opportunity to accrue more cash in their pocket to spend on other things.
People in East Anglia and the South East of England were most likely to have taken advantage of overpaying their mortgage. While residents in the West Midlands and Northern Ireland were most inclined (10%) to spend any extra cash.
Many mortgage holders don’t consider switching
With mortgage price wars having broken out recently, the number of lenders offering extras such as cashback and free legal fees has increased sharply. Three-quarters of mortgage deals on the market today offer some form of incentive to borrowers. That’s up from 62% a year ago, according to financial website Moneyfacts.co.uk.
Given the prevalence of mortgage ‘sweeteners’, it’s perhaps unsurprising that an astonishing 31% of homeowners had never checked if they could save more money by switching mortgage provider.
Acumen helps you to stay on top of your finances
Acumen offers tailored solutions to help you to stay on top of your finances and mortgage responsibilities. We give support throughout the mortgage process, through our trusted partnerships with solicitors for legal aspects.
Acumen also offers a protection package to protect your mortgage from unpredictable events. Plus, we can offer general financial ‘health checks’ in the event that a rise in interest rates affects your financial planning.
To discuss your mortgage plans with one of our dedicated team, please contact us today on 0151 520 4353 or email email@example.com.