Home loan risk for 10 million households

According to analysis by Legal & General Investment Management (LGIM), UK households are `more at risk of an interest rate shock than at any time on record`, The Telegraph reports.

The Bank of England has just decided to leave its base rate at 0.5% - marking the 2nd anniversary it has stayed at this all-time low.

The group`s research suggests that the UK economy isn`t ready to `withstand the 2 percentage points of rate rises markets are expecting before the end of 2012`.

A 2% rise would increase the monthly cost of an average £100,000, 25-year home loan by £170 - or £2,000 a year - by pushing the average home loan rate from 3.25% to 5.25%.

With nine in every 10 home loans now a variable-rate deal (which are affected by changes to the base rate), LGIM`s analysis means more than 10m of the 11.2m households (with total outstanding home loans of £1.2tn) are at risk.

News Source: http://www.thinkmoney.com