A 0.25% increase in the Bank of England base rate will result in an extra £1.8bn a year in mortgage interest payments – or £152.3m a month, Sainsbury's Bank says.
The bank calculates that a client with a £150,000 interest only loan and paying a typical high street lender's SVR of 5.5% would see monthly payments rise by just over £31. The bank is urging homeowners who are concerned about their ability to manage their mortgage payments if interest rates rise, to consider switching to fixed rate mortgages.
Lucy Hunter, mortgages manager at Sainsbury's Bank, says: “Our research shows there are 115,000 people with monthly mortgage payments of £2,000 or more. In total, there are 595,000 people paying over £1,000 and for some, particularly those who have over-extended themselves because of the low interest rate environment, any rise in their mortgage payments could make life financially difficult.
“Estimates suggest the Bank of England base rate could rise from 3.5% to 4.5% by the end of next year which would mean an extra £7.3bn a year in annual mortgage interest payments. On average, that would be equivalent to £465 for every person with a mortgage.”