Homeowners warned to prepare for interest rises
Homeowners are unprepared for a rise in interest rates, according to a new report.
Research by Yorkshire Bank found that many people are underestimating the impact of a rate change on their mortgage.
Of those surveyed, 28 per cent admitted that they had no idea how much a one per cent increase in mortgage rates would raise their monthly repayments, though more than half expected interest rates to rise in the next 12 months.
Around one in ten people are planning to buy a bigger home because they can afford it due to the current low rate of interest. Interest rates in the UK currently stand at just 3.5 per cent.
However, a one per cent increase in mortgage rates would see the average UK homeowner paying an extra £50 a month on their home.
Of the 2,200 people surveyed, one in four buyers admitted that they were prepared to take out the biggest mortgage they can to secure their dream home, while two fifths of first-time buyers admitted they would have no spare cash to carry out improvements on their new home.
Geoff Greer, head of Yorkshire Bank, commented: “For established homeowners the renewed confidence in property prices feels like a good thing.
“But our latest Homebuyers Survey worryingly reveals recent buyers could be lulled into a false sense of security by the current low interest rates, believing that paying today’s inflated house prices can continue to be easily affordable.”
More than 60 per cent of homeowners are confident that property prices will continue increasing during the next year, while just six per cent are worried about price falls.
However, high prices are continuing to force young buyers out of the market, 50 per cent of first time buyers said they couldn’t afford to live in the area they would like to.
