Quarter of Brits fear rise in interest rates

MORE than a quarter of Britons are worried about the impact an interest rate rise would have on their finances, a survey showed today.

Around 27% of people said they were concerned about the prospect of having higher mortgage repayments, while 4% said they were nervous about how an interest rate rise would affect their finances generally, according to moneysupermarket.com.

The Bank of England’s Monetary Policy Committee is widely expected to keep interest rates on hold when it announces the results of its two-day meeting tomorrow.

But interest rates are likely to start rising during 2011, increasing monthly mortgage repayments for people with variable rate loans.

A 1% rise in the base interest rate would cost someone with a £150,000 mortgage, who is currently on a standard variable rate of 2.5%, around £80 a month or £960 a year.

But while many people are worried about the impact rising interest rates would have on their finances, 53% said they would welcome the move, as it would enable them to get better returns on their savings.

Kevin Mountford, head of banking at moneysupermarket.com, said: “Low interest rates have been fantastic for a large proportion of UK homeowners and many people have become used to more disposable income each month.

“However, a base rate rise will push up mortgage rates, forcing many families to rein in their spending – potentially causing financial problems for many.”