1 in 5 plan to cut back on essentials to afford rate rise

Photo: Pictures of Money

1 in 5 Brits plan to cut back on essentials to make ends meet in the event of the Bank of England raising interest rates.

A survey by the Building Societies Association reveals that over half of borrowers (52 per cent) say they will struggle or fall behind their mortgage repayments when interest rates rise.

A rate hike has been expected for many months, as the UK economy continues to recover. But the BSA survey reveals that one tenth would experience real financial problems if it were introduced soon. A further 14 per cent said they would be able keep up with repayments, but it would be a constant struggle. One quarter of people (23 per cent) said that they would experience difficulty from time to time.
When questioned about the impact on their lifestyle, 18 per cent of borrowers say they will have to cut back on essentials such as food or clothing in order to make their monthly repayments. A further 15 per cent say they will have to work more hours in order to keep on top of their mortgage commitments.

Paul Broadhead, Head of Mortgage Policy at the Building Societies Association, notes that with the Bank Base Rate at historic lows for so long, there are at least 1.85 million homeowners who have never experienced a rate rise, so the concern is “unsurprising”.
“Clearly some of the actions borrowers say they would take may not be within their control, for example working additional hours,” he comments. “Our advice to those concerned about interest rate rises is to start thinking about how they will manage the increased costs. This could include creating a household budget, to taking a look at mortgage calculators and rescheduling unsecured loans such as credit cards. Free money advice is available for those that are concerned.”