Interest rate rise 'would leave 3m homeowners unable to pay their mortgage' - Telegraph

Interest rate rise 'would leave 3m homeowners unable to pay their mortgage' - Telegraph

Even if rates rose by less than two points, an estimated 1.6m mortgages would be deemed "unaffordable", according to guidelines set out by the Financial Services Authority.

There are concerns that interest rates might be raised on Thursday, despite last month's GDP figures that showed the UK economy grew at just 0.5pc in the first quarter of 2011. This would cause further misery for many struggling families already hit by tax rises, higher-than-expected inflation and the prospect of widespread job losses, particularly in the public sector.

According to figures from the Council of Mortgage Lenders (CML), if mortgage rates rose by two percentage points from their current rate, about 2.9m homeowners would have home loans that breached the regulator's affordability guidelines - the FSA states that "a mortgage is affordable if its level and terms allow the consumer to meet current and future payment obligations in full, without recourse to further debt relief or rescheduling, avoiding accumulation of arrears while allowing an acceptable level of consumption".