Many people with mortgages in Britain face a difficult time if interest rates increase over the next 12 months, research undertaken on behalf of Shelter has found.
Of the 40% of Britons who have mortgages, only 54% say that they are keeping up with their payments without difficulty at present. Worryingly, 31% say that while they can keep up, they do struggle from time to time to meet their payments. Life is even harder for a significant 12% of mortgage borrowers, who admit that they face a ‘constant struggle’ to meet the demand of their mortgage and pay on time.
If interest rates rise, this will cause mortgage payments to increase, and it seems that the difficulties that nearly half of borrowers already experience will become greater; although 31% say they have budgeted for an increase in payments, ten percent say they will have to dip into savings to cover the cost, while 29% say they have not even thought about it.
When asked what steps people thought they would have to take to afford increased payments, 59% said that they could make up the difference from their existing income. While it is comforting to know that the majority of mortgage holders can cope with increases in this way, it may be of some concern that 41% do not agree that this is the way they would manage. In fact, of this 41%, a significant 14% say that they would have to rely on their savings if their payments increased, while a small but notable two percent say they would have to take out a loan or borrow money on a credit card - meaning they face being forced further into debt. Another two percent say they would have to borrow from friends or family.
It is not only people’s bank balances and savings accounts that look set to change if there is an increase in mortgage payments. Nine percent said that they or their partner would have to get another job to pay for their mortgage, which could point to a significant shift in living patterns. In fact, ten percent of people who live in households with one or two children said they would have to take this measure.
The results of the research certainly present a worrying picture for mortgage borrowers. With many already facing difficulties in making payments, some look set for an even tougher time if a rise in interest rates causes mortgage payments to increase.
