Barclays Mortgages have recently released a ‘Financial Flexibility’ Report which aims to quantify the impact on mortgage borrowers should interest rates rise, as predicted, by the end of 2015.
Taking data supplied by the Centre for Economic and Business Research (Cebr) they have published potential scenarios for interest rate rises over the next 23 months.
The most ‘moderate’ scenario predicted that the Bank of England Base Rate would rise three times in the period and would stand at 1.25% by December 2015. The most ‘drastic’ model suggests five rate rises taking base rate to 1.75%, something which is not considered unfeasible by economic experts.
What impact does this have on borrowers ?
Based on Barclays predictions, using their average Scottish mortgage repayment figure of £556 per month and applying their ‘moderate’ model, monthly payments would increase by only £18. Using their drastic model, borrowers would see an increase of £39 per month.
Planning ahead
Whilst any increase in mortgage repayments may put some home owners under a degree of pressure, what Barclays predictions show is that even in their worst case scenario, for many, interest rate increases may be very affordable.
Quantifying the likely outcome of interest rises over the next 23 months will help many home movers put the extra cost into perspective and help them budget more accurately.
Guard against rises by fixing your rate
The impact of these predicted rate rises may only affect existing borrowers in the short term. As a home mover, you can opt to fix your interest rate for a period of time when securing your new mortgage. Fixed rates are freely available at the moment with the most common fixed period being anything from 2 to 5 years. However, the mortgage market can be complex and taking advice from a qualified mortgage broker who can research the market for you makes so much sense.
The outlook is positive
All things point to little green shoots of positive growth. Edinburgh is a contender behind only London in leading the economic recovery, interest rates look more than affordable in the short term even with predicted rises to the end of 2015, and there is renewed confidence in Edinburgh and the Lothians property market.
Not sure whether now is the right time to move?
With property prices in a number of areas in Edinburgh on the increase you may be wondering if you have missed the boat. The property market is a complex one and is made up of smaller ‘area’ markets. To find out what your own house is worth and chat about the price of property in the area you want to move to why not contact us for a pre sale consultation.