Homeowners anticipate financial hardship due to interest rate rise
According to the 2014 Homeowner Survey by the HomeOwners Alliance and Myhomemove, 34% of UK homeowners fear an increase in interest rates, and the subsequent financial difficulties in the payment of mortgage, and other bank loans and debts. This is almost 5.8 million homeowners worried that they may be unable to afford payments on their housing loans.
This worry is precipitated by the expectation that the Bank of England may start increasing the interest rates soon to control the property bubble. Increase in interest rates could have a far-reaching impact in the lives of Britons, as the survey reveals.
These are the key findings of the 2014 homeowner survey:
• More than one out of three homeowners in the UK fear that they may be unable to afford the payments on mortgage and other home loans, if the interest rates increase.
• Out of interest only mortgage holders, 64% fears a rise in interest rates will make it difficult to repay loans and debts, making them the most impacted group of homeowners.
• 54% of aspiring homebuyers say that an interest rate increase will make it really difficult for them to afford a new home.
• It is the younger homeowners who are more apprehensive. Only 24% of homeowners above 55 years of age fear that they may be unable to afford payment on loans and debts if the interest rates increase. Among homeowners between 25 to 34 years of age, this figure was at 49%.
Survey respondents commented that a rise in interest rates would place extra burden on an already stretched budget, and make it difficult for them to find money for even food. Since people have other debts than mortgage, many would be forced to sell their homes and rent.
Aspiring buyers hoping to step on the property ladder worry that they may not be able to afford a new home. Pensioners are not worried so much because their mortgages will be completed soon, but they too are concerned for their adult children who are new homeowners, or are yet to buy homes.
The Bank of England must consider these far-reaching consequences and a potentially devastating impact, before they increase the interest rates.