Refinance Fears Over Looming Rate Hike
Updated: 01:49, Friday May 04, 2007
Millions of homeowners could be forced to remortgage their property if interest rates go up as expected, it has been claimed.
'It could even be a 0.5% rise'
Research found that 14% of households feel they would have to refinance their loan if a rate rise boosted mortgage repayments by up to £50 a month.
The figure represented about 2.6 million homeowners across the UK.
Around 40% would have to remortgage if monthly repayments went up by £100, survey results indicated.
Around 2,300 British adults were interviewed as part of study by price comparison website moneysupermarket.com.
It revealed a quarter of mortgage holders hit by the last interest rate hike said they were financially stretched, struggling with repayments or having to sell or remortgage to keep afloat.
The Bank of England is expected to announce a further rate rise next week, with most commentators expecting a 0.25% increase.
Louise Cuming, from moneysupermarket.com, said: "We feel it could even be a 0.5% rise, which, according to the survey results will drive an alarming number of people into financial difficulty.
"Homeowners on a £150,000 interest-only tracker mortgage face additional costs of £750 per year, or £62.50 per month, for every 0.5% that interest rates rise.
"Assuming the May rate rise is 0.5%, many borrowers will have their mortgage repayments rise by 1.25% over the last 12 months - an increase of £156 a month, or £1,875 a year."
Research found that just 12% of borrowers were prepared for a further increase in their mortgage repayments.
More than half of all homeowners would be forced to find a better deal if their mortgage payments increased by up to £150 per month.