Majority of homeowners could see their first shift in adjustable mortgage rates

A survey found that more than half of mortgage holders switched providers because of interest rate increases

Majority of homeowners could see their first shift in adjustable mortgage rates

Most homeowners with adjustable-rate mortgages could experience their first interest rate increase if the low-interest-rate environment ends, according to survey results released by HSBC.

The study revealed that 87% of US homeowners have never experienced a rate increase on their mortgage or home loan.

“From a homeowner’s perspective, we’re heading into unfamiliar territory,” said Pablo Sanchez, HSBC’s regional head of retail banking and wealth management for HSBC Bank USA. “The average US homeowner is already spending almost 40% of their monthly income on their mortgage. When you factor potential interest-rate rises into household budgets, making that monthly payment could become a struggle.”

Twenty-four percent of US homeowners said they would struggle or not be able to pay their mortgage repayments if they saw a two-percentage-point increase in their interest rate. The figure climbs to 45% in the case of a five-percentage-point increase.

“The good news is that US homeowners are well-informed about their mortgage,” Sanchez said. The survey found that 81% of US homeowners are aware of how much interest they are paying while 79% are aware of their loan terms.

Although increasing rates are a concern, HSBC said homeowners continue to have options. Fifty-two percent of homeowners have switched providers and 46% have studied switching their mortgage to get a better deal. According to the survey, 53% of those who switched were primarily driven by a desire to obtain a better deal or because of increases in their interest rates. Other reasons homeowners switched included moving or buying a new property with 19% and the expiration of their existing mortgage deal with 12%.

 

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