Mortgage rates climb and first time buyers are underprotected

The Bank of England Base Rate rise to 5% yesterday means that mortgage rates will go up in line with the increase. This is bad news for homeowners - the last time the interest rate was this high was in 2001 – and many people will now struggle to meet their monthly repayments.

While homeowners will all suffer, it seems that the First Time Buyers (FTBs) are the ones most at risk. Research* shows that almost 45% of FTB’s do not have any kind of insurance to protect their income if they cannot work due to accident, sickness or unemployment.

The research* also shows that some 44% avoid taking insurance, such as Payment Protection Insurance (PPI) or income protection, as it is too expensive.

Other facts revealed by the research* showed:

• one in 20 FTB’s would have to sell their house if they were unable to work and couldn’t pay their mortgage.
• 21% said they would rely on friends and family to help them cover their outgoings should they become unable to work
• A third find bills and household running costs to be higher than they expected.

Simon Burgess from BritishInsurance.com says: “It is worrying that first time buyers are at risk of losing their homes, especially if interest rates keep rising.

“Many are barely managing to meet their repayments now, so what would happen if they lost their income due to redundancy for example?

“They need to protect their income and mortgage payment protection insurance is a very viable solution. It doesn’t have to be expensive, as borrowers can shop around for low priced cover “.

* Source: the Post Office