Rising fears
2.5m households couldn’t cope with mortgage bill hike 500,000 would struggle to pay an extra £21 a month 26% of renters could not afford £10 a month more
MILLIONS of home owners say they could not afford mortgage increases if the Bank of England hikes interest rates today.
The base rate is “highly likely” to be doubled from 0.25% to 0.5% to combat rising inflation, experts say – the first increase in a decade.
It would add £21 a month to the average £150,000 mortgage, pushing many squeezed borrowers beyond their means.
Even if the Bank’s Monetary Policy Committee does not vote for the rise today, Governor Mark has said it is on the cards “in the coming months”. Such a rise would be welcomed by savers who have seen little return on their nest eggs since rates were slashed to a record low in the wake of the financial crisis. But it will prove a hammer blow for many borrowers, according to the Mirror’s exclusive survey of over 1,000 people by pollsters Survation.
Some 35% of mortgage payers are on variable rates that could go up after today’s expected announcement. Yet 26.5% – equivalent to 2.5 million of the UK’s 9.2 million borrowers – said they could not afford “even a small increase” in home loan repayments.
Of the 73.5% who could afford a small rise, only two-thirds – 67% – could manage as much as £21 a month more. But 5.9% – or 400,000 – could not stretch to that. Another 2.3% – 155,000 – would struggle, and 24.4% – 1.6 million – would just about be able to scrape it together.
It means three million mortgage payers would be thrown into hardCarney
ship by the expected rate rise today. Renters and credit-card borrowers could also be hard pushed by the increase, our poll found.
Ex-Bank of England rate setter Professor David Blanchflower said increasing rates today would be “complete and utter madness”.
He added: “There is absolutely no basis to sustain a rate rise. Your survey shows how many people are coping at the moment.
“Real wages are falling, retail sales are falling, investment is on hold and inflation is set to decline.”
Lib Dem leader Vince Cable said: “Many young people, in particular, are overstretched and just about managing. A rise to 0.5% would be bad enough but the impact of successive rate rises on people’s finances will be enormous.”
Harry Rose, money Editor at consumer magazine Which?, said: “Almost half of home owners have never experienced an interest rate hike, raising questions about how well prepared they are for the impact it could have on their finances. It is vital that banks, lenders and utility companies offer help to at-risk customers.”
Debt charity StepChange warned: “Millions of household budgets exist on a knife edge. So while the increase in mortgage costs that results from a rate rise may seem relatively small, it may be enough to push some households from a position of just about managing into one of financial hardship.”
Jane Clack, of free debt advice service PayPlan added: “It is only a matter of time before people struggling to make ends meet default on their repayments.”
There’s no basis to sustain a rate rise. It would be madness DAVID BLANCHFLOWER EX-BANK RATE SETTER
WHEN so many families could be plunged deep or deeper in debt by even a small rise in interest rates, Tory bragging about a strong economy is dangerous hot air.
How depressing that so many are living in fear of higher mortgages and dearer borrowing when this is the world’s fifth largest economy.
The rich are enjoying a luxury ride while millions of grafters suffer hardships.
The value of wages falling again in the longest pay squeeze since the Victorian age and a typical worker £38 a week worse off than a decade ago offers no route to prosperity, no matter how hard we work.
Low interest rates ease the strain on family finances when prices are going up faster than wages, so a hike would be a disaster for those on the breadline or just above.
Britain is crying out for an economy that works for everybody rather than a wealthy few enjoying the fruits of other people’s labour.
Everybody doing a decent week’s work deserves a decent week’s pay. What a scandal they instead fear homelessness. We mustn’t put up with this injustice any longer.