Rate rise to throw quarter into financial difficulties
A Building Societies Association and Money Advice Trust survey showed 39% will have to cut spending on holidays and eating out to cope with rate rises, whilst a fifth say that they will be forced to cut back on essentials like clothing and food.
The 2,316 respondents showed over half think that the Bank of England’s official Bank Rate will be 2% or lower by mid-2017, despite Mark Carney, the Governor of the Bank of England’s warnings that Bank Rate will rise gradually from its current 0.5% to 3%.
Paul Broadhead, head of mortgage policy at the Building Societies Association, said: “Many consumers are only used to a low rate environment which will change and whilst most mortgage rates are not linked quite so directly to the base rate as they used to be, rates will rise as it increases.
“Clearly some of the actions borrowers say they would take may not be within their control, for example working additional hours. Our advice to those concerned about interest rate rises is to start thinking about how they will manage the increased costs.”
Joanna Elson, chief executive of the Money Advice Trust, said: “Our message to borrowers is clear – interest rates will rise and that day is coming soon, so now is the time to prepare. Draw up a budget, speak to your lender, and if you do find yourself struggling to repay, seek free debt advice as early as possible.”