A recent report about the sad state of affairs for those living and working in the United Kingdom has found that over three million citizens in the UK would not be able to make their mortgage payments if the rates rose by just 1%. This startling fact should help push through legislation to help ease the mortgage problems in the UK. With the mortgage market sinking further into disrepair, many are looking for ways in which to stretch their pound further. While the recent increases in mortgage rates are not yet in place, the threat of a rising mortgage is a frightening one for many people.
According to market research, the precise number of people who would have major problems making payments on their mortgages includes over 2.7 million people. These holders of variable or tracker mortgages would not be able to keep up with payments on their mortgages should these changes take place. The difference between variable and tracker loans is that a tracker loan is a type of variable loan. However, the main difference is that tracker loans follow or track a main European index. This means that mortgages which are considered to be tracker loans are a bit easier to predict, due to the fact that their values must remain under a highly predictable minimum and maximum.
For those under a variable or tracker scheme, the average mortgage holder would have to pay £100 extra per month as a result of the 1% rise in rates. If rates were to increase by even more, by 2%, over 4.8 million people in the UK would have to make major adjustments to their finances in order to keep up. This average increase of £200 per month means that big changes would have to be made if mortgage holders were to keep up with the policy.
In addition to these larger numbers, even a smaller increase in the rates charged to mortgages would cause countless people to have major problems with their finances. Over 900,000 owners of homes in the UK have demonstrated that they would have problems with an increase of just £50 extra per month. With such a small increase causing such a large group of people to have hardships, it is clear that the financial situation for many people in the UK is dire.
These figures are put into a realistic scenario as the numbers have just been released from the Bank of England, the central bank for the entire United Kingdom. The decision from the Bank of England whether or not to raise the record low 0.5pc rate for mortgages has thousands of people concerned. The rate may likely be raised in order to help the government fight against possible higher rates of inflation. Inflation being the greater of two evils, the impact that not raising the key rates would have may be even greater than if the central bank does go ahead and raise the rates.