Mortgage holders unaware of potential £1.1 billion repayments rise in 2015

Homeowners in Britain may have to deal with a £1.1 billion total increase in mortgage repayments by the end of this year and not many of them are well informed, Barclays and the Centre for Economics and Business research say in a new report.

With half of the holders of variable rate mortgages unsure or completely unaware of a potential increase in repayments in 2015, many are likely to have financial difficulties throughout the year, the researchers warn.

Nearly half, or 46 per cent, of homeowners are not sure what the current Bank of England base rate is and 88 per cent do not know what the Bank’s latest interest rate outlook is.

The people say their confusion mostly comes from the changes in regulation, market projections and conflicting family views. Furthermore, 45 per cent of homeowners suspect they might have overpaid for their mortgages by not changing or fixing them in time because they were unsure about the rates.

The research also shows that 76 per cent of British homeowners are not making provisions for potential interest rate hikes.

The Cebr has developed three models for the expected increases in mortgage repayments in 2015.

The first, ‘sharp’ model, projecting the biggest increase, is based on the assumption that there will be three rate hikes and the base rate will rise to 1.25 per cent by the end of the year.

The second, ‘medium’ model, suggesting a potential total increase in repayments of £904.2 million is based on an expected single interest rate rise of 0.25 per cent in May 2015.

The third, ‘gentle’ model, shows the smallest potential increase in repayments for this year, of £723.8 million. This means that at the very least individuals would have to deal with an average annual increase in mortgage repayments of £81.12 by the end of 2015.