The majority of British homeowners could comfortably cope with a moderate rise in interest rates, Moody’s has said this morning.
Only about one per cent of borrowers would be unable to cover mortgage payments and meet their living expenses if interest rates rose by one per cent from their historic low of 0.5 per cent, according to the global ratings giant.
Even, in a harsher scenario, if the bank were to raise the base rate by three per cent, only four per cent more borrowers would face payment problems.
“Borrowers that are up-to-date on their payments will be able to adjust their discretionary spending if incremental rate rises are spread out over the next three years,” Moody’s analyst Emily Rombeau, who co-authored the report, said.
Bank of England governor Mark Carney gave his strongest hint yet of the timing of a rate hike after warning last week that a decision would come into “sharper relief” at the turn of the year.
Speaking at Lincoln Cathedral Carney said inflation pressures were now starting to firm again. Wage growth – a key metric for the BoE – reached a five-year high in the three months to June and Carney said he expected the effect of falling oil prices to drop out of the annual inflation rate by the turn of the year.
Some experts believe rates could start rising as soon as this year while Moody’s has forecast the base rate will start to rise very gradually as of the end of the first quarter of 2016, to around 0.9 per cent by the end of the first half.