Young people and first time buyers concerned about interest rate rises

The continuing rise in interest rates has been an ongoing issue for many people in 2007. With the Bank of England expected to raise the rate again this week, a survey by Equifax, the leading instant online credit information provider has revealed that 57% of young people are concerned about the impact of the rate on their long term spending plans.

Equifax is advising consumers not to overstretch themselves and to plan financially for the future or face unmanageable debt.

“It is crucial that consumers plan for the future and not just the short term,” confirms Neil Munroe, External Affairs Director, Equifax, “Interest rates may rise further in 2007 and if this is the case, what may appear to be manageable now may not be in a few months time.”

Young people and first time buyers are a group particularly affected by the increases, with 46% of 25-30 year olds, who responded to the Equifax survey, concerned about the effect the increases in the rates will have. For some, such as first time buyer Claire Foster, 26, from Surrey, the interest rate rises have seen monthly mortgage payments increase by as much as £100 a month.

Due to the cost of house prices, Claire’s dad had to help her out when she bought her first home three years ago. She was planning to move later in the year but she is concerned about further rises plus larger utility and council tax bills. “The interest rate rises do worry me”, said Claire. “Although repayments are becoming a struggle I am keen not to move further out of London. I am quite careful with money and I have no credit card debts or an overdraft. But with rising living expenses, council tax and motoring costs too many more interest rate rises would put me in dire straits”.

Claire continues: “My father told me horror stories of how he thought he was taking on a huge burden when he took out a £50,000 mortgage in 1988. Luckily his salary rose enough to cover it but at one point the payments went from £270 to £550 a month. I didn’t think this could happen again and so bought at the top end of my budget. I was also planning to move to a two bedroom house this year as I feel I have outgrown my one bedroom flat. But if interest rates continue to rise, I may even consider stepping off the property ladder.”

Munroe concludes, “Unfortunately, Claire’s story is true for many young people hoping to buy their first home, or indeed struggling with mortgage repayments. Our survey revealed that 44% of consumers anticipated that interest rate rises would have an impact on their finances, with 33% claiming day to day living costs would be affected. Therefore, I would advise consumers to gain a true picture of their finances and credit commitments and use this information to help them decide how to plan for the future and reduce monthly outgoings. It’s no good thinking, I can afford this at the moment. Consumers need to think, ‘will I still be able to afford this if the interest rates go up.”

To get a clear picture of their finances, Equifax recommends that consumers get a copy of their Equifax Credit Report. This can be done instantly online at equifax.co.uk.