Mortgage payment rise would mean one in five 'couldn't afford food'

According to research by consumer group Which?, one in five UK residents 'couldn't afford food' if mortgage payments rose.

The research found that 70% of mortage-holders are concerned about an increase in interest rates.  More than a millon home owners have recently seen the cost of their mortgage payments increase as several lenders raised standard variable rates (SVR) at the beginning of the month.

One in seven home owners currently struggle to pay the mortgage and 20% would not have enough for essentials such as food if their repayments rose by £100 a month.

Three quarters of mortage holders told Which? that they would be affected if their repayments increased by £50 a month, with 41% saying they would need to cut back on regular spending - 20% of them by reducing savings and 11% said that this would not leave them enough for essentials such as food.

Consumers also highlighted the emotional impact of increases in mortage repayments, describing them as 'devestating' and 'a disaster'.

Earlier this month, Halifax raised its SVR from 3.5% to 3.99%, affecting 850,000 homeowners.  Borrowers revert to paying a SVR when their fixed rate deals end.

The Co-operative Bank, Clydesdate Bank and Yorkshire Bank are also amongst those who have recently risen their rates, blaming the weak economy and the increased cost of funding a mortgage.

Which? Chief Executive Peter Vicary-Smith said "Our advice to anyone struggling with their mortage repayments is to speak to their lender straight away.  It is encouraging that a third of the people we spoke to had already approached their lender, but worryingly in one in five cases said their lenders had offered no help at all."

Which? wants lenders and the Financial Services Authority to do more to protect consumers against unjustified interest rate rises and ensure that consumers are offered the ability to fix their payments at a reasonable level.  Which? also said that lenders should not be allowed to take advantage of borrowers who are unable to move lender.

Mark Harris, Chief Executive of mortage broker SPF Private Clients said, "Interest rates may have been held at 0.5% for more than three years but lenders such as Halifax are raising their SVRs regardless.  Anyone on their lender's SVR, whether it is going up or not, should check whether they could get a better deal by remortaging.

"Many borrowers simply aren't aware that they could save money by switching deals so it's worth checking with the broker whether this is the case."

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