Rise in interest rates 'could make mortgages unaffordable'

A rise in interest rates would spell disaster for London mortgage owners, according to new findings.

According to the final Property Tracker report of 2013 from the Building Societies Association (BSA), 27 per cent of homeowners cited this as their biggest worry for 2014.

The report also suggested that consumers are far more worried about the affordability of monthly mortgage repayments today than they were three months ago.

Its figures highlighted the fact that for 46 per cent of people, affordability is one of the main barriers to getting a mortgage, up by 11 per cent on September 2013.

Commenting on the findings, Paul Broadhead, head of mortgage policy at the BSA, said: "It is understandable that consumers are wary about a rise in interest rates in 2014, but unless the pace of economic recovery picks up considerably, it is unlikely we will see the Bank Base Rate rise over the coming 12 months, and when interest rates do rise, it is likely to be gradual."

However he added that consumers should shop around for the best deal when purchasing a property.

There is also evidence to suggest that the increasing cost of mortgages is helping to persuade some consumers to rent properties instead.

Findings published by Hometrack at the beginning of the month showed that house prices in the UK increased by 0.5 per cent last month.

The biggest house price rises were seen in London and the south-east, where prices went up by 4.8 per cent and 3.2 per cent respectively over the last six months.

Although the demand for housing grew by three per cent, the number of properties available for sale declined by 3.5 per cent.

Another report released by Estate Agent Hamptons International said rising house prices in the capital prompted people to seek out alternatives.

Published 17th December, 2013

© 2013 Estates IT Limited