Interest rate rises will squeeze mortgage affordability to push monthly mortgage repayments above 20pc of household income

Homeowners could face a jump in their mortgage repayments of more than £1,000 as soon as next year as interest rates rise and lending conditions tighten. A increase in the base rate from an historic low of 0.5pc to 1.5pc would add £1,312 to the annual burden for a household on an average interest-only mortgage of £131,215 payable over 25 years. This equates to nearly £110 a month, according to new data from property agents Savills. For those homeowners with a capital repayments loan the increase would be £872 - taking the monthly bill from 18pc of the borrower's income to over 20pc.

The Bank of England has said any rate rise will be gradual but it has signalled a potential increase by the end of this year. Expectations are for quarter point increases and the Bank's latest Inflation Report indicates markets see rates at around 1.2pc by the end of 2015 - although the upcoming Inflation Report could see that raised.....Read more here