Mortgage holders feel the pinch

Demand for mortgages has dropped with the rates increase

New research suggests mortgage holders have had to cut spending on holidays and other luxuries because of the rise in interest rates.

People with the average mortgage of a £115,000 now have to pay more than £100 a month extra because of the five interest rate rises since November.

Research by broker Purely Mortgages suggests that 50% of mortgage payers have had to cut back as a result.

Around 14% of homeowners said they had cancelled holidays to make payments.

And around 11% told the online survey by YouGov that they would have to consider selling their property if rates increased again.

The Bank of England raised interest rates to put a brake on soaring house prices and it appears to be working.

Although interest rates are still historically low, it doesn't take much for people to feel the pinch Mark Chilton Purely Mortgages

Britain's biggest mortgage lender, Halifax, said earlier this month house prices had fallen by 0.6% during August, while the Royal Institution of Chartered Surveyors has also pointed to modest price falls across most of the country.

And on Monday, the British Bankers' Association said levels of mortage lending were down.

In the Purely Mortgages survey, nearly a third of homeowners said they had cut back on non-essential items such as clothes and gadgets, while 11% have reduced their weekly food shopping bill.

One in 20 homeowners has decided to forfeit private health cover and private education for their children, while 1% have taken the more drastic action of selling their home or a second property.

Mark Chilton, chief executive of Purely Mortgages, said: "We may yet get another interest rate rise this year, and if this happens figures like these are only set to get worse.

"Although interest rates are still historically low, it doesn't take much for people to feel the pinch, especially for older people on lower incomes."