Millions of homeowners to refinance if rates increase

Millions of homeowners say they will be forced to remortgage if, as expected, rates increase next Thursday.

More than seven million people would be pushed into remortgaging if a rate rise led to their payments increasing by up to £100 per month, 2.6 million of whom say they will have to remortgage if their payments rose by up to £50 per month, according to new research from moneysupermarket.com.

Louise Cuming, head of mortgages at price comparison website moneysupermarket.com, said: “The looming rate rise is of grave concern. We feel it could even be a half per cent rise which, according to the survey results will drive an alarming number of people into financial difficulty.

“Homeowners on a £150,000 interest-only tracker mortgage face additional costs of £750 per year, or £62.50 per month, for every half per cent that interest rates rise.

“Assuming the May rate rise is half a per cent, many borrowers will have seen their mortgage repayments rise by 1.25 per cent over the past 12 months – an increase of £156 a month, or £1,875 a year. So it’s clear to see why so many homeowners may now struggle.Anyone finding it difficult to make their mortgage repayments already (or who think they might after the next rate rise) should try to remortgage to a better deal before next Thursday if they can.”

The survey figures also show just over half (53 per cent) of people with a mortgage were affected adversely by the last base rate rise in January. Of these, 15 per cent are only just coping financially with their current lifestyle, nine per cent are struggling so much with recent increases in mortgage repayments they are already making sacrifices, and one per cent are having to sell or remortgage.

According to the research, just 12 per cent of borrowers are prepared for any further increase in their mortgage repayments and more than half (54 per cent) of all homeowners would be forced to find a better deal if their mortgage payments increased by up to £150 per month.

Louise added: “It is alarming that people are still not budgeting for the increased mortgage repayments a further rate rise will bring. With so many saying they will be forced to remortgage if their monthly payments increase it is staggering more borrowers have not yet factored this in. Even more worrying is that people who are relying on being able to remortgage if their repayments rise may not be able to afford to do so due to the early redemption charges in place on many products. These people need to review their finances and budgeting immediately.”