New research from financial advisory firm Saltus indicates that if the Bank of England (BoE) opts to raise interest rates this week as anticipated, the impact could be dire for many homeowners.
According to the data, nearly three out of four people are already struggling to maintain their mortgage payments.
Mike Stimpson, partner at Saltus, voiced concern over the potential rate hike: “As speculation grows around the BoE’s twelfth consecutive interest rate rise this week, we’re seeing swap rates increase, leading many lenders to preemptively raise mortgage rates.”
The implications of a continued rise in rates are troubling. Saltus’ Wealth Index report disclosed that as of November 2022, approximately three out of four people were already grappling with the pressure of keeping up with mortgage payments. Any additional increase could exacerbate the financial strain for homeowners.
The study also revealed that nearly half of respondents anticipated that rising interest rates would strain their cash flow, with over 25% already feeling the impact.
High-net-worth individuals, defined as those with over £250,000 of investable assets, are also feeling the pinch. More than eight in ten (84%) were either bracing for or already experiencing increased financial strain due to escalating interest rates.
“Interest rate markets are assigning a probability of over 80% for a 0.25% hike, aligning with the US Federal Reserve’s action earlier this month,” Stimpson added. “A persistent increase in rates will likely put people under even greater financial strain, particularly in terms of managing personal finances and mortgage repayments.”
In response to these mounting pressures, more individuals are expected to dip into their pension savings to cover the shortfall – a move that could create long-term financial problems. However, Stimpson offers a glimmer of hope: “A small silver lining is that the rate rise may slow and even start to level out over the coming months, potentially easing some pressures later in 2023.”
