Interest rate worry for homeowners

24/06/2011

By Kevin Dixon

Mortgage holders are becoming increasingly vulnerable to interest rate rises, figures show.

Almost seven out 10 current mortgage balances are on variable rates in the first quarter of this year, the Financial Services Authority said. The figures is at its highest level since 2008.

The Bank of England has kept interest rates at a record low of 0.5 per cent for more than two years, but economists are expecting a hike in early 2012.

Capital Economics property economist Paul Diggle said: "Given the high level of mortgage debt outstanding in relation to incomes, that could have serious ramifications for payment problems when interest rates do eventually rise."

The warning comes as figures reveal the first rise in home possessions in a year. FSA said new possessions rose 17 per cent to 9,613 in the quarter, although this was countered by a drop in arrears trends.