However, unsecured borrowing has grown in recent years and 60 per cent of mortgaged households are said to have some unsecured debt, mostly based on variable-rate deals. Mr Pannell admits that, given the varying financial circumstances of UK households, base rate rises may cause “pockets of greater payment stress to show”.
Nonetheless, the majority of mortgage borrowers are likely to be on fixed rates, which provide some breathing space before any rate rise affects finances. On top of this, recent borrowing has been largely based around repayment mortgage deals: rate rises will have less of an impact upon these in comparison to interest-only mortgages.
The MPC’s cautious stance is a further reason for optimism – it is keeping a close eye on the economy and signs of stress would likely prompt a further reduction in the pace of tightening.
