The rise of interest rate in May could mean that £16 a month will be added to the bill of a family with a typical £100,000 home loan. When added to the cost the previous three interest rate hikes in August, November 2006 and January 2007, it means mortgage repayments for the average homeowner will have gone up by £63.79. Lenders are expected to announce details of their new mortgage and savings rates over the coming days.
It comes at a time when debt charities are reporting a surge in the number of people seeking advice over debt problems and mortgage arrears. Figures show that the number of households who saw their home repossessed soared last year to 17,000, up 65% on 2005. And amid rising interest rates and affordability concerns, many debt experts believe the number of people falling behind on repayments is set to increase further; a lot of people on low incomes who had taken out expensive mortgages could find their budgets stretched to the absolute limit.
Lenders are being urged to look sympathetically at borrowers who may start to struggle with payments, as fears grow that the latest rate rise could push more and more hard-working families to the brink of repossession and homelessness. Not only could the rate rise add financial burden of thousands of households, it could also make it harder for people to escape money problems through freeing up equity in their property. Analysis’ point out that anyone who has an interest-only
mortgage will see payment rise by 22% from the first rate rise in August 2006, with many feel that the housing market is slowly which will make it harder for borrowers in difficulty being able to sell their properties to get out of financial trouble.
New buyers are being advised to check extremely carefully to make sure that they can still afford to get a
mortgage.
