61% of homeowners are uncertain when UK interest rates might rise, according to research from Barclays Mortgages produced in partnership with the Centre of Economic Business Research (CEBR).
Homeowners cite different political and regulatory statements, conflicting family views and changing market commentary as the main reasons behind this widespread uncertainty.
Of concern was the fact that 46% weren’t able to correctly recall the UK’s current base interest rate and also that only 12% were aware of a recent Bank of England announcement forecasting mortgage rates will rise in October 2015.
Barclays Mortgages said this lack of awareness may contribute to UK mortgage holders experiencing financial difficulties in 2015. 49.5% of those with a variable rate mortgage don’t expect or aren’t sure that their mortgage repayments will rise in 2015, despite the CEBR predicting that homeowners across the UK could face a potential £1.1 billion total increase in mortgage repayments by the end of 2015.
This is based on the CEBR’s ‘sharp but potential’ model suggesting three rate rises in 2015 (taking base rate to 1.25% by December 2015), something which would increase average mortgage repayments for individuals by £118.97.
The second ‘medium’ model focused on a single interest rate rise of 0.25 percentage points in May 2015 and would see homeowners across the UK paying an additional total of £904.2 million in their mortgage repayments by the end of 2015 averaging at £101.33 per homeowner.
At a very minimum the CEBR predicts an average annual £81.12 increase in mortgage payments for individuals by the end of 2015. When looking at the UK as a whole, this ‘gentle model’ would result in a total £723.8 million annual increase in repayments.
This comes as the research found that 76% surveyed do not put aside money for any potential mortgage rate increases. The survey also found that 45% of UK homeowners felt they may have missed out on better mortgage rates and therefore paid out more because they weren’t sure whether or not to fix or change their mortgage.
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.”
Those between the ages of 30 and 49 face the largest hike in mortgage repayments, with a potential £362.1 million increase in total mortgage repayments. Regionally, those in South East can expect the biggest rise in payments with a total of £158.9m, despite over three quarters of homeowners (77%) admitting to not putting money aside as a financial buffer to cope with potential rate rises.
Scots are least likely to put money aside for potential interest rate rises, with only 10% saving for their mortgage repayments going up. Welsh homeowners are most likely to save, with a third putting aside money even though their potential mortgage increases not being as large as other areas in the UK.
Londoners are the ‘best off’ in the UK, with the CEBR predicting the capital’s homeowners can expect a reduction of £20 on average per person on their mortgage repayments by the end of next year.
However, when taking the region as a whole, total mortgage repayments increase by £124 million as the number of mortgage paying households in the capital increase.
Whilst confusion over mortgage rates is wide spread throughout the UK, homeowners in the West Midlands are most uncertain with 67% having no idea of when the base rate will go up, whilst those in the South West are most savvy, with 45% aware of Mark Carney’s current interest rate announcements.