However, specialist mortgage broker FirstMortgage says that whilst an increase in rates would have a significant impact on UK homeowners, that the rise is likely to be gradual, therefore there is not such a risk of the economy stalling into a triple dip recession.
The Bank of England’s deputy governor Paul Tucker said last week that if interest rates were to rise by just 1% then households accounting for 9% of overall mortgage debt would need to act fast in order to be able to afford their mortgage repayments.
With excellent long term fixed rates available in the market, First Mortgage are actively encouraging clients to take advantage now, whilst they are available, and protect themselves against future rate rises.
Ian McGrail, Managing Director of FirstMortgage, the broker says:
"A rise in interest rates would undoubtedly be a concern for homeowners and with historically low interest rates over the last few years many borrowers have adjusted to significantly reduced mortgage payments therefore increasing their disposable income. Any rise in interest rates would cause borrowers to review spending habits or even consider working more in order to afford their increased mortgage payments."
"Those on tracker rate mortgages are most at risk and will see an immediate increase in mortgage payments as their rate will rise in line with the bank of England increases, whereas those on a fixed rate will only be impacted once their current deal comes to an end."
