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Buy to Let

Borrowers unaware of potential payment rises

Paula John
Written By:
Paula John
Posted:
Updated:
12/01/2015

Half of homeowners with variable rate mortgages aren’t aware that their repayments could rise next year, according to the Centre for Economics and Business Research (CEBR).

Research by the think tank has found widespread ignorance amongst the UK public.

Over three quarters (76%) aren’t putting money aside for interest rate increases, despite the CEBR predicting a minimum total mortgage payment rise of £723.8m across the UK when rates rise.

Homeowners cite different political and regulatory statements, conflicting family views and changing market commentary as the main reasons behind this widespread uncertainty.

When asked, 46% weren’t able to correctly recall the UK’s current base interest rate and only 12% were aware the Bank of England forecasted mortgage rates will rise in October 2015.

At a very minimum the CEBR predicts an average annual £81.12 increase in mortgage payments for individuals by the end of 2015. When looking at the UK as a whole, this would result in a total £723.8m annual increase in repayments.

The CEBR modelled for a maximum of three rate rises in 2015, taking base rate to 1.25% by December 2015, which it claimed is not considered unfeasible by economic experts and which would increase average mortgage repayments for individuals by £118.97 by the end of 2015.

The survey added: “Almost half (45%) of UK homeowners felt they may have missed out on better mortgage rates and therefore paid out more because they weren’t sure whether or not to fix or change their mortgage.”

Those between the ages of 30 and 49 face the largest hike in mortgage repayments, with a potential £362.1m increase in total mortgage repayments.

Regionally, those in the South East can expect the biggest rise in payments with a total of £158.9m.


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