Norfolk in mortage timebomb warning

Tens of thousands of homeowners across the region are sitting on mortgage timebombs that are waiting to explode as soon as interest rates start to rise.

The alarm has been sounded following the release of figures that suggest a startling 80pc of people in the east of England are unaware of what impact rising interest rates will have on their home loan repayments.

No other part of the country demonstrated such ignorance in the research, which was carried out by the Consumer Financial Education Body (CFEB) – an organisation that aims to improve consumer awareness of personal finance.

Not all those people will be adversely affected by interest rate rise – many of them will have fixed-rate borrowings, for example – but there are fears that many of them will struggle to meet their obligations when rates go up.

When rates began to tumble in 2008, many people saw their monthly mortgage repayments fall. But although some homeowners have taken the opportunity to make overpayments on their loans, many others are thought to have simply absorbed the extra cash and used it for day-to-day living expenses. Those are the people who are most at risk from rising interest rates.

The Bank of England base rate was kept at its historical low of 0.5pc yet again this week, but sooner or later it will rise again. Data analysts Moneyfacts.co.uk have calculated that someone with a £150,000 mortgage paying it back over 25 years would face an increase of about £120 a month if the base rate rose to 2pc. Someone on a £150,000 interest-only mortgage, meanwhile, would see an increase of nearer £190 a month.

And it is likely the base rate will go much higher than 2pc in the longer term.

Debt charity the Consumer Credit Counselling Service said low interest rates had simply delayed the inevitable.

“We believe that a lot of the pain of the recession has been deferred and that it will be increasingly felt as the ef-fects of public sector cuts are felt and when interest rates increase,” said spokesman Una Farrell.

“Our mortgage arrears and repossessions counselling centre experienced a 23pc rise in calls answered during 2009 and we expect it to increase further this year and next.”

Mary Graham, regional manager for the CFEB, said: “It is clear from our research that many people with mort-gages haven’t thought about what it would mean for their monthly payments, or where they would find the extra money in their household budgets if their mortgage rates were to go up.

“It is very worrying that homeowners in the east of England were amongst those showing the least awareness and knowledge.

“Lack of time means many of us often put off reviewing our finances, but it doesn’t have to be time-consuming to keep on top of your money matters.”