When the Bank of England increases the standard base interest rate there will be many homeowners that will face financial difficulty.  According to a recent study by Money Advice Service (MAS), 56% of homeowners have no plan in place for how to cover extra mortgage costs after the interest rate is increased.  The next meeting of the Bank of England’s Monetary Policy Committee is less than a week away and while the October meeting is not expected to result in an interest rate hike, the expectation of an increase is that the beginning of 2015 will see the historically low 0.5% rate change for the first time since March 2009.

The MAS study also revealed that 20% of homeowners would be left with real financial struggle with an increase in their interest rate.  While there were 84% of the polled homeowners that admitted an increase would impact their financial situation.  Slightly less than 70% admitted that they were already stretched financially. 

Nick Hill, money expert with MAS, remarked, “Mortgage holders need to be more mindful of the fact that a rise in interest rates is widely predicted.

“The smallest increase in mortgage repayments can make a significant impact on a family budget, especially for people who are already stretched.”

The next meeting of the MPC is short of a week away and while there is not expected to be a majority vote to increase the rate this month, there will likely be members that will vote for the increase.  As the economy continues to improve the warnings of an impending increase to the rate will become louder.  Expectations of experts are that the turn of the year will definitely bring more expensive borrowing and homeowners should prepare for the inevitable.

The good news is that the remortgage deals currently on the market are some of the cheapest seen in years.  Homeowners are encouraged to shop around and secure a fixed-rate remortgage deal before the low rates disappear – which may be sooner rather than later.