Bank Governor's rate rise fears for homeowners: Almost one in 25 mortgage borrowers could be vulnerable 

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Almost one in 25 mortgage borrowers could be vulnerable when interest rates start to rise, the Governor of the Bank of England warned this weekend.

In an exclusive interview with The Mail on Sunday, Mark Carney said about four per cent of mortgage-holders were at risk of being unable to pay their debts if, as expected, the Bank of England lifts rates in the next year. 

But he insisted any rise would be gentle and the Bank would keep a close eye on whether it was causing problems.

Governor of the Bank of England Mark Carney said about four per cent of mortgage-holders were at risk of being unable to pay their debts if, as expected, the Bank of England lifts rates in the next year

The Governor’s warning applies to borrowers for whom the cost of paying their debts amounts to 40 per cent or more of their income.

He said: ‘If you are spending more than 40 per cent of your income on debt service you are vulnerable. 

'If you are off sick from work or you get not as many hours of work or interest rates go up, those type of factors make it more likely that you would not be able to pay those debts.

‘Today we have about two per cent of households who are in that position. For mortgage-holders, it’s about four per cent of households.’

With almost seven million mortgage holders in Britain, the vulnerable group amounts to roughly 280,000. 

Carney said there was no certainty that rates would rise, but it was the central expectation of the Bank’s rate-setting Monetary Policy Committee.

Carney said there was no certainty that rates would rise, but it was the central expectation of the Bank’s rate-setting Monetary Policy Committee

‘There has been significant progress in the last seven years. The economy has grown, a lot of jobs have been created and we are now seeing wages pick up. 

'Wage growth is about three per cent, though that’s not evenly distributed. So a lot of things are happening which are consistent with the idea of interest rates beginning to increase. 

'We’ve talked on the MPC and the view is that the next move in rates is likely to be up. That is still a decision to be taken. 

'We have underscored that the path of rate rises will be a modest, gentle pace because there are headwinds against the economy.’

Most City economists expect interest rates – which have been at a historically low 0.5 per cent since the financial crisis – will start to rise next year. But uncertainty in the global economy means there is still huge debate about when.