Over 50% of UK home owners believe an interest rise of 1% would have a negative effect on their finances, new research has found.
The survey by YouGov for Equifax found that owners in the East Midlands topped the table of those who feel the most negative at 16%, with their neighbours in the West Midlands topping the table for those who feel the most positive about coping with an interest rate rise at 8%.
It is inevitable that there will be an interest rate rise in the coming months with some experts thinking it will be before the end of the year and others next Spring although it is expected to be a quarter of one percent, much less than the 1% mentioned in the survey.
But it is worth noting that so many say that they would struggle financially to meet a 1% increase in their monthly mortgage repayment and the figures underline the need for people with a mortgage to think ahead.
‘The issue that many home owners are currently facing is the uncertainty surrounding interest rates. When asked how much a potential rise of 1% would affect their monthly mortgage repayment, 40% of home owners did not know, with those living in Wales the least certain at 57%,’ said Andrew Webb, sales and marketing director of Equifax Personal Solutions.
‘While a third of the home owners we surveyed are currently protected by a fixed rate mortgage, many are already thinking about how they can prepare for any rise that occurs before their fixed rate deal ends. For these individuals, an early review of their financial commitments could help them to prepare for a future mortgage application,’ he explained.
He revealed that the research also found that many home owners see value in cutting back on their lifestyle spending, including holidays and socialising, in order to account for potential increases in essential future expenditure.
When applying for a mortgage, credit information can be used to confirm an individual's identity and assess their likely ability to repay. Equifax believes it's important, therefore, that home owners understand what information is available to lenders, in order to address any areas that may affect their ability to get the best mortgage for their circumstances.
For example, dormant or unused credit accounts are still likely to be considered as available credit during an affordability assessment and could impact any offer a lender is willing to make. Likewise, missed payments may cause concern for lenders if viewed as an indication that the applicant lacks responsibility in repaying debts or is already financially stretched.
‘We suggest anyone planning to apply for a new mortgage or remortgage in the next six to 12 months keeps track of their current financial commitments and regularly checks their credit report to ensure that it remains accurate and up to date,’ concluded Webb.
Source - PropertyWire