Mortgage holders may face hard times if rates rise

ONE in five mortgage holders would be forced to make spending cutbacks if interest rates started rising, and one in 14 would seriously struggle to cope, according to a report.

Speculation is rife that rates may rise from their current long-term historic low of 0.5 per cent in the new year or earlier, leaving tens of thousands of people without proper provision to cover the hike.

Half of people surveyed for Nationwide Mortgages said they were already using credit cards and overdrafts to fund their everyday spending, including food bills.

If rates moved at all, 20 per cent said they would have to cut back on spending and a fur ther seven per cent believed it would leave them seriously struggling.

Nearly one in five of the 2,000 homeowners with mortgages surveyed had no rainy day fund to call on in case of emergencies.

It found almost 16 per cent of people were more interested in talking about the weather than interest rates. One in 10 said they did not know how interest rates worked and were not interested in finding out.

While 39 per cent of those surveyed had used the relatively cheap cost of borrowing from low interest rates to overpay their mortgages and repay their debts, six per cent had used the opportunity of having more cash in their pocket to spend.

Nearly a third of homeowners had never checked if they could save more money by switching mortgage provider.

According to financial website Moneyfacts.co.uk, three-quarters of mortgage deals on the market offer borrowers some form of incentive, up from 62 per cent a year ago.