UK homeowners brace for interest rate hike with fixed mortgage payments
Most homeowners in the south east are worried about the impact of an interest rate hike in the next 12 months, a Halifax study shows today. However, increasing numbers are preparing for the increase by fixing their mortgage payments.
Halifax found 53 per cent of people in the south east were concerned about rates, while 41 per cent in London were worried – a level in line with the national average.
In response to the threat of rising rates, homeowners are increasingly fixing the rate they pay on their debts.
In July, 90 per cent of new mortgages were fixed-rate loans.
That is up from 86 per cent across 2013, 69 per cent in 2012 and 50 per cent in 2010.
Back in 2004, just 37 per cent of new mortgages were taken out at a fixed rate.
The increase in caution from borrowers does seem to be having an impact – the survey found 57 per cent of those with a variable rate mortgage were worried about a rate hike, compared with only 43 per cent of those with a fixed rate loan.
“With the base rate remaining at 0.5 per cent for over five years, a significant number of homeowners have not yet experienced the effects of a rate rise,” said Halifax’s Craig McKinlay.
“While responsible mortgage lenders take into account potential rate increases as part of the affordability checks in the mortgage application process, the way in which people manage their remaining disposable income will be a key factor in how well they can adjust to any changes in rates.”
Economists expect the Bank of England to increase the base rate from 0.5 per cent to 0.75 per cent at some point in early 2015.
This month, two members of the monetary policy committee voted for that 0.25 percentage point increase, the first time any policymakers had voted for a rate hike in more than three years.