YourMortgage.co.uk: Interest rate rise 'may stretch mortgage holders'

Date:Tuesday 29th June 2010
Author: Susanna Kavka

Mortgage holders may be financially stretched if the Bank of England decides to put up interest rates, experts have stated.

According to YourMortgage.co.uk, many people have seen their budgets severely tightened in recent years, particularly those who have been made redundant.

The website noted that during this period, the current base rate of 0.5 per cent has been the "saving grace" for lots of consumers.

This means that if interest rates go above current levels, it could lead to an increase in mortgage payments and become the "straw that broke the camel's back".

However, Paula John, editor of yourmortgage.co.uk, said the Bank of England will be conscious of this risk and aim to avoid it by raising rates by just 0.25 per cent at a time.

"They will want to avoid payment shock," she commented.

Ms John added that in the last 12 months, people have made the most of the record low interest rates by overpaying on their mortgages more than at any time in recent history.

She was speaking after Halifax reported that the cost of running and owning a property has dropped by £500 since 2008.