The Bank of England insists that interest rate rises will not trigger problems for home owners

The Bank of England insists that interest rate rises – whenever they come – will not tigger problems for mortgage holders.
Using a ratio of mortgage payments to household income, the Bank says just four per cent of current mortgage holders would need to “take action” – for example, renegotiate their mortgage term or conditions – if interest rates rose to 2.5 per cent from their current 0.5% historic low.

However, that calculation did assume that, over the course of the next five to seven years, there was a 10 per cent rise in household incomes. If incomes did not rise, it said, up to 37 per cent more mortgagers would need to act in response to a rate rise.

Bank of England governor Mark Carney has long said that interest rate rises will be gradual and well-signposted; recent speculation has suggested there will be no increase until, possibly, the second half of 2015.

The Bank is upbeat about long-term prospects for current owners and those about to buy.

“Encouragingly, the proportion [of mortgage holders] reporting that they are having problems paying …. has fallen from 19 per cent in September 2013 to 14 per cent in September 2014. The proportion of all households with high mortgage debt-servicing ratios is currently low relative to its average since 1991” says a Bank spokesman.