Interest rates, and their historic lows, have been favourable to property buyers for the last few years, but new research has shown that an increase in the near future could be harmful to the market and leave many unable to afford to buy a home.
According to findings published this week by Ocean Finance, even as little as a one per cent hike in the interest rate could be damaging for those who are borrowing with the intention of buying a home.
Since 2009, the interest rate has sat at 0.5 per cent, with the Bank of England unwilling to move it any higher as it seeks to promote growth and financial health for people and businesses across the UK. However, with the country now having been in a period of growth for more than a year, predictions are in place that we will start to see the interest rate climbing from spring of 2016.
"It’s inevitable that interest rates will rise at some point, whether that happens in spring next year or later in the year. Whilst the rate rise is likely to be gradual and it may take a while to get to a one per cent increase, every rate hike will have an impact on hard working families who are already struggling to make ends meet," said Gareth Shilton, Ocean’s spokesperson.
According to the company, an interest rate increase of just one per cent would leave the average British homeowner on a standard variable rate mortgage having to pay £55 extra per month on a loan of £100,000.
However, homeowners are already taking steps to make sure they can afford their mortgages should this come to fruition. Ocean said that some 16 per cent of people worried about the potential for an increase in the interest rate are planning to fix their rates to secure their prices for the foreseeable future.