60% of homeowners confused about rates rise
Six out of ten homeowners are confused about when mortgage interest rates will rise, despite predications they could face a £1.1bn increase in repayments by the end of 2015, new research has revealed.
With interest rates remaining at historic lows in recent years, many predict there will be some sort of rise in the next 12 months, which could leave homeowners struggling to cover the additional costs.
But according to research from Barclays Mortgages and the Centre for Economics and Business Research (CEBR), 61% of homeowners were uncertain when rates might rise. Conflicting and contradictory statements from politicians, regulators and experts were cited as reason for the confusion, while nearly half (46%) of owners were also unable to recall what the base rate currently stands at (0.5%).
A whopping 88% were unaware of the Bank of England's forecast that rates will rise before the end of 2015, adding to the sense of confusion some homeowners feel over their mortgage repayments.
According to the CEBR, Brits could face the collective £1.1bn increase if there were three rises of 0.25% each in 2015 (taking the base rate to 1.25% by December). This model would see mortgage repayments rise by an average of £118.97 per household by the end of the year.
But even if there were only one 0.25% rise, the CEBR predicts an average annual increase of £81.12 in repayments, resulting in a combined increase of £723.8 million. Any sort of increase could see homeowners in financial trouble, the research found, with three-quarters of people (76%) admitting that they haven't put any money aside to cover any potential increases.
Andy Gray, Barclays managing director of mortgages said: "Our report shows there is widespread confusion over interest rates and we encourage homeowners to review their current situation and get advice on what their next mortgage step should be.
"We want our customers to remain financially fit in the face of potential interest rate rises in 2015, and believe the impending rise that the CEBR has modelled shows some homeowners may be caught unaware by unexpected increased repayments."
Also referred to as the bank rate or the minimum lending rate, the Bank of England base rate is the lowest rate the Bank uses to discount bills of exchange. This affects consumers as it is used by mainstream lenders and banks as the basis for calculating interest rates on mortgages, loans and savings.