Monthly mortgage payments could cost the average worker more than half of their take-home pay once the Bank of England increase interest rates, it has been claimed.
According to Capital Economics, it is almost certain that the Bank will increase interest rates to around five per cent, or possibly even higher, from their current low of 0.5 per cent.
If this happens, it means mortgage rates will be pushed up to eight per cent.
The research firm says this would see average mortgage payments at the start of a new mortgage increase from 34 per cent of take-home pay to 51 per cent for those buying a new home, the Telegraph reports.
Meanwhile, for existing borrowers it will reach a record 42 per cent of net salary.
Paul Diggle, an economist at Capital Economics, said: "The fact that most fixed rate periods in the UK are just two or three years long means that even most borrowers on fixed rates are exposed to a high degree of interest rate risk."
Last week, the Council of Mortgage Lenders reported that gross mortgage lending fell by 14 per cent in April.
Mis-sold Mortgage Claims > Mortgage News
Mortgage payments could top half of take-home pay
Tue, 24 May 2011
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