British families would struggle if interest rates rose to 2pc or more, as soaring mortgage debts have accumulated during years of rock-bottom borrowing costs, the Bank of England has warned.

The vast majority of households can comfortably afford their loans at the current base rate of 0.5pc, the Bank’s Financial Policy Committee said, with indications of financial strain substantially below those seen just before the financial crisis.

Mark Carney and his colleagues increased the base rate from 0.25pc to 0.5pc in November and are expected to move to 0.75pc in May.

But the FPC, which is chaired by Mr Carney, indicates that just a few more such moves could put significant numbers of households under strain.

“Mortgage interest rates would need to increase by around 150 basis points [1.5 percentage points] with no change in household income for [the ratio of people paying more than 40pc of their incomes on their mortgage] to return to its pre-crisis average,” the FPC said in the minutes of its latest meeting.

 

https://www.telegraph.co.uk/business/2018/03/27/families-will-struggle-interest-rates-rise-just-2pc-bank-england/