How to cope with interest rate rises on your mortgage


Updated on 09 October 2014 | 0 Comments

Mortgage holders need to start planning for rises now.

Mortgage holders need to start preparing for interest rate rises, following research which found more than half have no contingency plans in place for when rates do start to increase.

A study by the Money Advice Service (MAS) found that 56% of borrowers have no plans in place to help them cope with an increased mortgage bill. More than a quarter of people don’t know what their mortgage rate is, while 8% are unaware that a rise is coming. Many more simply don’t understand their current mortgage deal and the impact that a rate rise would have.

Keep track of your finances accross mortgages, current accounts, investments, pensions, savings, physical assets, and more. Access Plans for free today >

Just under half of respondents would find it difficult to cover an extra £150 a month. Thankfully, as the Council of Mortgage Lenders (CML) has pointed out, this equates to two full percentage points on an average mortgage, something that’s unlikely to be seen for a couple of years at least.

Thinking in the short-term, a quarter point rise would add roughly £16 to an average monthly mortgage repayment. Though many haven’t taken steps to plan for higher interest rates, the CML argues that the likely, gradual “baby step” increases will be manageable.

56% of MAS respondents admitted that they could cover the extra cost if they cut back on everyday purchases, 35% said they would dip in to their savings and 15% would take on an extra job.

Stay on top of your financial commitments with Plans, and benefit from its quick and simple financial collation service. Access Plans for free today >

What you can do now

There are a few useful measures that you can take before interest rates rise.

The CML recommends that you:

Will you be able to keep up with mortgage interest rate rises? Let us know in the comments section below.

Compare mortgages with lovemoney.com

Quickly and easily find out exactly how much you're worth, while staying on top of your entire financial life. Access Plans for free today >

More on mortgages:

Take advantage of the mortgage price war

EU rules to make it harder to get buy-to-let mortgages

TSB mortgage: pay no council tax for a year

Comments


View Comments

Share the love