Financial pressure on homeowners could increase with rate rises

An independent financial group has recently stated that homeowners could find themselves under intense financial pressure if the base interest rate is increased. The group is one of a number of industry groups that have recently expressed concern over how homeowners will cope in the event that interest rates increase and their repayments shoot up.

The most recent concerns have been expressed by Riach Independent Financial Advisers, with Bob Riach from the group stating that homeowners on tracker mortgages could see a huge jump in their repayments if there is a significant increase in the base rate. This comes after a number of industry officials predicted that the base rate would have to rise soon in order to keep a lid on inflation.

Many of the concerns centre around the prospect of repossession numbers soaring again, with those that will struggle to make repayments at risk of losing their homes. Some industry experts have said that the base rate will increase gradually, and could reach 1 percent by the end of this year. However, one report even went as far as to say that the base rate could increase to a massive 8 percent within the next couple of years.

Mr Riach said: “If rates go up and incomes do not, some people are going to be under pressure. Very low borrowing rates have helped to cushion some customers from the effects of the recession.” He added that the repossession situation could be made even worse by rising interest rates.

The base rate has been at an all time low of just 0.5 percent since March of 2009, and this has given many homeowners financial relief when it comes to their repayments. However, increases in the base rate could reverse this situation, leaving many people struggling to make repayments again.