20,000 first-time buyers vulnerable to rate rise

11:35 Friday 16th October 2015

Research has found that 20,000 first-time buyers could fall into mortgage arrears following a 1.5% base rate increase.

Mortgage administration company HML has calculated that for lending between 2005 and 2007, the last period where a rate rise occurred, 6.58% of first-time buyers experienced arrears within the first three years of the mortgage.

Damian Riley, Director of Business Intelligence at HML, said the trends showed a worrying pattern for first-time buyers who had not factored future interest rate rises into their budgets.

“Historically we have seen that they are more exposed to worsening economic factors,” said Damian.

“Tracking the current percentage of income being spent on monthly payments shows that if base rates were to increase to 2% (a 1.5% increase), pushing the average variable rate to 5.05%, first-time buyers may be spending almost a quarter of their income on their mortgage.”

Damian said potential mortgagees should consider the impact of rising interest rates on their ability to make repayments before taking the decision to buy.

“Any customers who cannot currently afford to pay their mortgage or who are worried about slipping into arrears should talk to their lender at the earliest opportunity, to give them plenty of time to find a solution that works for both parties,” concluded Damian.

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20,000 first-time buyers vulnerable to rate rise

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