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One in four mortgage payers 'at risk' if interest rates rise

Robust wake up calls should be sounded to the estimated two million mortgage payers who would find themselves in serious financial trouble if and when interest rates rise, a think tank has warned.

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Interest rate rise could force repayments 'up by £400'

Mortgage repayments could jump by at least £400 every year if interest rates rise by 1%, a think tank warned.

The Resolution Foundation gave indications of how changes in mortgage rates could impact on repayments.

  • A rate of 3.2%, which corresponds with current average mortgage rates, means someone with a 25-year mortgage of £150,000 pays £727 a month.
  • But if this rate increases to 3.7%, the monthly cost is £767, amounting to around £480 a year more.
  • If the rate jumps another percentage point, to 4.7%, the monthly cost is £851 and the mortgage holder pays in the region of £1,488 more a year than they would on a rate of 3.2%.
  • Moving the mortgage rate up to 5.7% means the mortgage holder pays £939 a month, or around £2,544 a year more than on a rate of 3.2%.

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