Most mortgage holders concerned about interest rate rise, finds Direct Line
Monday, 06 Dec 2004 12:24
Direct Line has urged mortgage holders concerned about rate rises to switch to a fixed or capped-rate deal
Most mortgage holders would be concerned about their payments if interest rates rise on Thursday, Direct Line has found.
A hike in base rate by the Bank of England would leave 58 per cent of homeowners worried, even if their monthly repayments went up by under £100.
Additionally, 44 per cent of the public think rates will rise after the Bank of England's Monetary Policy Committee meet on December 9.
But despite these findings, just two per cent of the people surveyed for the Direct Line mortgage index said they would actively look for a better mortgage deal if rates do rise.
Direct Line has advised mortgage holders to move to a fixed or capped-rate mortgage deal to protect against any possible rises.
"Give yourself an early Christmas present with the security of a fixed rate mortgage. You will know exactly how much you have to budget for, so even if you get carried away with your Christmas spending, your mortgage is under control," said Paul Hemingway, mortgage manager at Direct Line.
Direct Line also found that while more than a third of homeowners (39 per cent) would think about moving to a cheaper mortgage if it saved them £250 or less a year, people could save more than £400 a year on an average mortgage of £66,111 by switching to a five-year fixed-rate mortgage at 5.29 per cent.
Currently around 17 per cent of UK homeowners have a fixed or capped rate mortgage.
But despite mortgage holders' fears, most experts believe interest rates will not rise on Thursday.
"I am as close to certain as it is possible to be in these matters that the UK [base] rate will be left on hold at 4.75 per cent at next week's meeting of the Monetary Policy Committee," said Royal Bank of Scotland group chief economist, Jeremy Peat.
"The big question is what happens next ... it is certainly a distinct possibility that [base] rate is now at its peak. However [if certain data does not alter] one further rate hike around August next year looks likely. That would take rates to a peak of just five per cent," he added.