Mortgage blog: Report forecasts payments rising £48 per month by end of 2015
A new report has forecast that the average homeowner could see their mortgage repayments rise by £252 a year by the end of 2015 if interest rates start to rise gradually. The Centre for Economic and Business Research (CEBR) has also published a ‘drastic scenario' that would see annual mortgage repayments rise by an average of £576 if rates were to rise by 1.25% by the end of next year.
Average mortgage repayments set to rise by £252 a year in most likely scenario
The Financial Flexibility report, undertaken for Barclays, assumed that the ‘most likely' scenario is that interest rates will rise at a moderate pace in 2015. This means the base rate would rise to 0.75% in May 2015 and then 1% in August before edging up again to 1.25% in November next year.
The CEBR research found that homeowners could see their mortgage payments rise by £252 a year on average by the end of next year if interest rates rise at this moderate pace. Average mortgage payments across the country would rise from their current monthly levels of £666 per month to £687 a month in the most likely scenario.
However, the think tank report also forecast a ‘drastic scenario' where the base rate reached 1.75% by the end of 2015. Deemed ‘feasible' in the report, this would push up typical annual repayments by £576, or by £48 a month.
Homeowners urged to act now
The CEBR report found that those in the lowest fifth of the income groups could see an increase in the chunk of their income that went towards mortgage payments, from around 54% now to 55%.
Many experts are encouraging homeowners to review their mortgage and to consider taking a long-term fixed rate if they are worried about rising interest rates.
Andy Gray, Barclays' managing director of mortgages, says: "In working with the CEBR we have tried to model the realities that UK home owners may face in the very near future. In the face of a rise in mortgage rates and in the cost of living, it is vital for home owners to review their current situation."
However, other industry professionals believe that homeowners could benefit from being patient. Keith Osborne, editor of Whathouse.com, says: "With house prices rising quickly in some areas, you may find that when your existing mortgage deal comes to an end, the amount of equity you have in your home will have risen enough to push you into a lower loan-to-value bracket. If you owe a smaller proportion of your home then you may have access to a better choice of mortgage deals."
Click here to find out more about how Whathouse.com can help you find the right mortgage.