It’s official: The Bank of England says mortgage borrowers could cope with an interest rate rise
The majority of mortgage borrowers would be fine if interest rates rose, reckons the Bank of England.
According to the Bank, if interest rates rose by two percentage points, just four per cent of mortgage borrowers would need to "take action", ie. cut their spending or work longer hours. That represents 1.3 per cent of households. However, the calculations did assume that over the same period as interest rates rise, household incomes rise 10 per cent.
The news comes several months after the Bank's Mortgage Market Review placed restrictions on lenders, forcing borrowers to undergo "stress tests" to see whether they could cope in the event rates rose by three percentage points.
This might provide an indication that the Bank is considering raising rates earlier than expected. At the moment, economists expect it to wait until next autumn to take steps to increase the interest rate from its historic low of 0.5 per cent – but these figures provide an encouraging suggestion that households would be able to handle the increase in living costs.