*sigh*
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“It’s worrying to see that so many think they’d struggle paying the mortgage should the base rate rise by as little as 2%. What’s also clear is that the understanding of how interest rates affect payments is incredibly low. Simply put, a rise in rates from 1% to 2% is a hundred percent increase, which means a doubling of payment. For example if you were paying £750 per month your new payments would be £1,500,” said Nick Hungerford, CEO and founder of Nutmeg.
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While ‘accurate’ it’s not a fair representation of the real world unless of course you have a interest only mortgage which is held at BASE + 0%.
A more realistic example is a £181k mortgage at 1.49%+BASE which rises by ~£200/month with a 2% rise in the base rate {not that I have a spreadsheet already setup to track this sort of thing..}
Getting across the risks of interest rate rises is a good thing but seriously guys, bring some reality into the equation so the public can actually properly assess their risk rather than trying to panic the herd.
Link to original article
