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One in five mortgage holders in the UK have said they would really struggle to find the extra money to cover any increase in repayments, new research has found. Nearly half would find it difficult to cover up to £150 extra per month and over a quarter don’t know what their current mortgage interest rate is,’ according to the Money Advice Service which is urging home owners to plan ahead for anticipated rises in interest rates. The study, of 3,007 UK mortgage holders, found that 56% have no contingency plans should interest rates rise, 47% would find it difficult to meet an increase of up to £150 in monthly repayments and 8% said they were unaware that rates are likely to rise at all, increasing to 16% for those under 35 years old. Many mortgage holders said that their finances are stretched already. Some 69% described themselves as already financially stretched when they took out their existing mortgage and this rises to 77% for those aged under 35. Also 13% admitted they are currently living beyond their means. As a result 19% said they would really struggle to cover any rise in interest rates in their monthly repayments. A significant proportion admitted to little understanding of their current mortgage deal and what impact a rise in rates would have on them. Some 28% of mortgage holders said they didn’t know what their current mortgage interest rate is, with 59% saying they had not calculated the impact that a modest one per cent rise would have on them. And 3% admitted that they didn’t even know what their current monthly mortgage repayments are. The vast majority of respondents, 84%, said an increase in interest rates would impact their finances. Many would therefore have to take immediate action to cover the increase in repayments. Although over half, 56%, admitted they would find the money to cover any increases by cutting back on day to day basics, 35% said they would have to use money from their savings, while 15% would find an extra job, 5% would have to turn to credit cards, and 2% said they would take out a payday loan. ‘Mortgage holders need to be more mindful of the fact that a rise in interest rates is widely predicted, even for those on a fixed rate, as their deal will come to an end sooner or later. Those who purchased their first property in the last five years will have only ever known historically low interest rates, but less than 10 years ago the interest rate set by the Bank of England was 5% higher than today,’ said Nick Hill, a money expert at the Money Advice Service . ‘The smallest increase in mortgage repayments can make a significant impact on a family budget, especially for those people who are already financially stretched. So it’s a good idea to review your personal finances, start looking at where you can cut back, and plan ahead now,’ he pointed out. ‘Unexpected costs often… Continue reading →
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