Interest rate rise could see mortgage costs go up

News from the Lincs Free Press and Spalding Guardian, spaldingtoday.co.uk, @LincsFreePress on Twitter
News from the Lincs Free Press and Spalding Guardian, spaldingtoday.co.uk, @LincsFreePress on Twitter

A new report from the credit-ratings agency Fitch says the ongoing economic and housing market recovery will support short-term mortgage performance, with arrears continuing to fall in the next 12 months.

But the agency says a combination of low interest rates and the Government’s Help to Buy scheme has created an increase in demand which is not being met by the rigid UK housing supply.

This has led to regional overheating of house prices, particularly in London and the South East where Fitch says the biggest house price increases have taken place, relative to income.

Interest rates are widely expected to rise before the end of 2015, possibly sooner given the sudden falls in unemployment.

A spokesman from Fitch says: “As we saw around the crisis in 2008, any changes in interest rates can drastically affect people’s ability to make their mortgage payments and a similar scenario could arise.”

If a rate rise comes as we expect before the end of 2015, variable-rate mortgage borrowers could be faced with an unmanageable increase in their monthly mortgage payments.