Mortgage Holders 'may Struggle With Increased Interest Rate'
An expert has said that people with home credit packages - particularly landlords and renters - may struggle to afford an interest rate hike.
An expert has said that any rise in the interest rate in the foreseeable future could push many mortgage holders into financial problems following the global economic downturn.
The Bank of England's Monetary Policy Committee recently opted to maintain the base rate at 0.5 per cent for the 16th month in succession as the country continues to emerge from the effects of the recession with an estimated budgetary deficit of more than 140 billion.
This means that many people with their own or buy-to-let home credit packages may struggle to keep up with their repayment plans, which may cause them to delve into their savings accounts to help fund these.
Therefore, landlords seeking a mortgage for any new property may be advised to compare savings prior to making any final decision on which product is best suited to their needs in order to stop them running into financial trouble.
A recent report from spareroom.co.uk - which was published on July 14th - found that 41 per cent of landlords' who own mortgage repayments are barely covered by the income generated from their portfolio of properties.
However, of greater concern to this sector is the fact that 43 per cent indicated that a two per cent rise in the interest rate would leave them without the amount of income required to pay their monthly instalments on their home credit package.
And Chris Jenkins, co-owner of the Homeowners Advice Centre, has commented that any such increase could see some homeowners and landlords being "pushed over the edge of their financial wellbeing".
He went on to state that interest rates should be treated as "the foundation to any economic recovery" and warned that a rise of one per cent is likely before the end of 2010.
The effect of this increase could be felt by renters, Mr Jenkins continued, as landlords may be forced to put their rates up in order to afford their own overhead costs.