Homeowners are likely to spend an additional £1.6bn in interest payments on unsecured loans in the next 12 months, according to research commissioned by specialist mortgage lender, Pepper Money.
The research found that 7.7 million homeowners could be hit with an annual increase in interest cost payments of more than £900 on their unsecured loans, including car loans.
The research conducted by YouGov, found that 7.7 million homeowners currently have at least one unsecured loan. Of these, 15% have already seen the interest rate charged on their unsecured loans increase in the last six months, with the average increase being more than £900 a year.
Over the next 12 months, this means that British homeowners could be spending an extra £1.6bn in interest payments on unsecured loans.
Laurence Morey, CEO at Pepper Money, said: “We know that the monthly commitment of servicing short-term debts such as personal loans can put extra pressure on family finances if the cost of servicing those loans is increasing. In these circumstances, consolidating those debts by refinancing onto a homeowner loan at a lower rate could potentially put families in greater control of their finances, enabling them pay down that credit over the longer term.
“Debt consolidation may not be the right avenue for everyone, but there are many families that could benefit from taking a proactive approach to managing their monthly spend on interest payments. Analysis of our own lending at Pepper Money shows that debt consolidation loans are being made to normal people, with higher than average incomes, who are just looking to restructure their finances.
“Often these people have run up large balances over a long period of time and debt consolidation provides them an opportunity to take greater control over their monthly interest payments.”