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