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Rate rise to 'stretch' homeowner finances

The latest rise in interest rates is likely to stretch the finances of thousands of UK homeowners, the Council of Mortgage Lenders (CML) has claimed.

While the Bank of England's decision to put interest rates up yet again to 5.75 per cent had been widely expected and had been factored into market expectations, many households will nevertheless be forced to reassess their outgoings in order to keep up with their mortgage repayments.

"At present four out of five new borrowers are taking out a fixed-rate mortgage and will be protected from the immediate effects of today's rise," said the CML's director general Michael Coogan.

"But this is the fifth interest rate rise since 2006, and two million borrowers will be coming off a fixed-rate deal in the next 18 months on to higher mortgage payments," he added.

According to the latest figures published by the Office for National Statistics, the current squeeze on the disposable incomes of UK homeowners is at its biggest since 1982, with house prices and interest rate growth far outstripping the 1.1 per cent rise in average take-home pay experienced during 2006.

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06/07/2007 15:54:02

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