Borrowers are not ready for higher interest rates and could struggle to pay the bills even with a small rise in repayments, RBS chief Ross McEwan warned yesterday.
Most RBS and NatWest mortgage borrowers had never experienced an interest rate rise, he said, and nationally more than 1.5m borrowers bought their house after 2007 when rates last went up. He is setting up a task force headed by RBS senior economist Sebastian Burnside to study the impact of a rate rise, and come up with a plan to prepare borrowers.
Banks already run affordability checks on borrowers to make sure they can afford the mortgage even when rates rise sharply. But that does not mean borrowers themselves are prepared.
“While the combination of falling unemployment and falling inflation makes calling the timing of any increase in the base rate very difficult, we know it is something very much on the minds of our customers,” McEwan said.