To keep on top of payments, 24% of respondents said they would cut back on non-essential expenses while 18% said they would also reduce spending on essential items.
Some 15% of homeowners said they would ask employers for longer working hours but 7% said they would go one step further and ask for a pay rise or look for a better paid job.
Head of mortgage policy at the BSA Paul Broadhead said concerns from borrowers over a rate rise were natural as at least 1.85 million homeowners have never experienced one before but he urged people to start planning now to minimise the impact on their finances.
“Clearly some of the actions borrowers say they would take may not be within their control, for example, working additional hours,” said Broadhead. “Our advice to those concerned about interest rate rises is to start thinking about how they will manage the increased costs. This could include creating a household budget, to taking a look at mortgage calculators and rescheduling unsecured loans such as credit cards. Free money advice is available for those that are concerned.”
There has been wide speculation about when the Bank of England will begin to raise the base rate from 0.5%. Delivering a speech in Lincoln Cathedral in July, Mark Carney said to achieve the inflation target of 2%, the Monetary Policy Committee would need to gradually increase the Base Rate ‘around the turn of this year’.
However, Simon Checkley, managing director at Private Finance, said an interest rate rise was unlikely to significantly impact the majority of homeowners.
“There is still considerable uncertainty over when exactly interest rates will rise. However, what is certain is that rates are highly unlikely to increase dramatically enough to have a major impact on a large proportion of homeowners. Even if rates were to rise by as much as 2%, we would see that a typical client with a joint income of around £80,ooo would still only be looking at paying a small amount more each month,” he added.
“However, this is really a worst case scenario. A rise of 0.5% or 1% is far more likely, which would make additional payments even more manageable for most joint income households.”
Last week, the US central bank voted not to increase interest rates this month. Rates in the US have been between zero and 0.25% since the financial crisis in 2008. Commenting on the Federal Reserve’s decision, Ben Brettell, senior economist at Hargreaves Lansdown, said: “It’s widely thought that the Federal Reserve will be the first to raise rates. As such a delay in the US pushes back the likely timing of the Bank of England’s first move.”