The mortgage rate rise test

Following comments by the outgoing Governor of the Bank of England, Mervyn King, that current low mortgage rates are unsustainable, the Mail on Sunday proposed a simple test for borrowers. Find out the current interest rate you pay, then use an online mortgage calculator to work out what you could be paying if interest rates rose by 1%. Its example showed monthly repayments on a £140,000 mortgage, currently on a 4.75% rate, rising by £83 per month or almost £1,000 per year.

Other papers reported cases of borrowers starting to salt away extra cash in deposit accounts on a monthly basis to build a buffer against the day when interest rates do start to rise.