Homeowners cutting back on luxuries

Homeowners are beginning to feel the pinch of recent rate rises.

13:00 22 September 2004

Mortgage holders are starting to cut spending on luxury items in order to accommodate recent interest rate rises, new research suggests.

A survey on behalf of broker Purely Mortgages suggests that 50 per cent of mortgage holders have been forced to make cutbacks in spending on luxury items because of the increases in the cost of borrowing, while 14 per cent said they had cancelled holidays to make mortgage repayments.

The online YouGov survey also found that around 11 per cent of respondents would have to consider selling their property if rates increased again.

According to the survey, nearly a third of homeowners said they had cut back on non-essential items such as clothes and gadgets, while 11 per cent had reduced their weekly food shopping bill.

One in 20 homeowners has decided to forego private health cover and private education for their children, while one per cent admitted that they had sold their home or a second property.

Homeowners with the average mortgage of a 115,000 now have to pay more than 100 a month extra because of five quarter-point interest rate rises introduced by the Bank of England since November.

Analysts believe that successive hikes in the base rate of borrowing are starting to have the desired effect of cooling down the overheated UK housing market.