Average monthly mortgage repayments could jump by up to £563 if the base rate returns to pre-crunch levels, moneysupermarket.com has warned.
The Bank of England’s Monetary Policy Committee is expected to hold base rate at 0.5% this week, marking 18 months of no change. But interest rates will have to start rising at some point and a new poll on moneysupermarket.com found that a quarter of people are worried about the impact this will have on their finances.
27% of people surveyed admitted to being worried about an increase in Base Rate affecting their mortgage repayments and clearly this could affect a large number of households. For example, someone sitting on an interest only mortgage of £150,000 on a 2.5% SVR would currently pay £312.50 per month in repayments. Should the base rate rise by 1%, their repayments would jump by £125 per month to £437.50, landing a hefty blow to their finances.
However, if the base rate rose to 5.00% – the level it was in October 2008 before it plummeted – the SVR could be 7.00% and this figure jumps to £875, over £562.50 extra per month.
In July 2007, before the onset of the credit crunch, base rate was even higher at 5.75%. If it returned to this level, borrowers on SVR could see their mortgage repayments more than triple to £968.75.
The moneysupermarket.com poll also reveals that 52% of those surveyed would welcome an increase in base rate to give their savings pots a much needed boost.
Kevin Mountford, head of banking at moneysupermarket.com said: “Low interest rates have been fantastic for a large proportion of UK homeowners and subsequently many people have become used to more disposable income each month. However