1.75m Homeowners Unprepared For Mortgage Increase

The Bank of England (BoE) last increased the base rate in July 2007 and interest rates hit rock bottom in March 2009. This has meant over 1.75 million UK homeowners have never faced a rise in the BoE base rate.

Mortgage payments around 18% of income
During 2014 these first time buyers were spending, on average, 18.4% of their income on their mortgage. If the base rate is increased many homeowners may be in for an unexpected financial shock.

If you have a £100,000 repayment tracker mortgage over 25 years, even a small rise of just 0.5% in the base rate would mean your repayments would increase by £300 a year.

Take control
There is still uncertainty around when the rates will rise but while rates remain low it’s a good idea to get ahead of the game by reviewing your spending habits and budget.

Filling out an income and expenditure form will help you identify where you can easily make savings if you have to. Charities like The Money Charity offer a free online form, or you can easily search online for templates. Simply gather together all of your bank statements and bills. Work out your total income and outgoings. Don’t forget to add in things such as Christmas or your car MOT. Once you know how much you have left over at the end of the month you’ll be better prepared for any future surprises.

Fixed rate
Whilst reviewing your finances you may also want to think about reviewing your mortgage. With a fixed rate mortgage, the rate (and therefore your repayments) will stay the same for an agreed period. This makes budgeting much easier because your payments won’t change – even if interest rates go up.

Your home may be repossessed if you do not keep up repayments on your mortgage.