The effect of rising interest rates on fixed rate mortgages has, so far, been quite limited, as the Bank of England pushed interest rates up to 5.75% in July 2007, the fifth rise in the last 12 months. However this is set to change over the course of the next 18 months as The Council of Mortgage Lenders (CML) estimate that over 2 million fixed rate mortgage deals will mature during this period. Those borrowers who took out 2 year fixed rate deals two years ago will face substantial increases in their payments.
Homeowners will need to budget at least £100 per month more than they are currently paying and on top of this increase they may also be liable for arrangement fees. The households who will feel the largest financial pressure will be those whose mortgage and credit commitments already account for a large share of their monthly income.