Middle class homeowners in their 50s are most likely to be hit the hardest by last week’s interest rate rise, new research shows.
According to Experian, middle class 50-55 year-olds are most impacted by the rise in interest rates to 0.50%.
They form a financial group, named ‘Small Savers’ by Experian, which represents 1.2 million of the UK population. Predominantly based in the North West, they are mature workers with the advantage of homeownership but with nominal savings to sustain their future income.
Six out of 10 of this group have a variable mortgage and minimal savings to prepare for unexpected rises in monthly outgoings.
Experian estimates that four million British households in total have a variable mortgage, with those holding this type of borrowing most stung by a rise in interest rates.
The increase means a homeowner on a 2% tracker mortgage of £200,000 outstanding over 20 year, will have their monthly repayment change by £24 from £1012 to £1036 – an increase of £288 per annum.
Fixed rate mortgage homeowners – of which there are 4.3million in the UK – will not be immediately affected and have been enjoying annual savings of £3,048 compared to the average standard variable rate mortgage of 4.51%.
However, when the time comes to remortgage the interest rate could jump up quite significantly and with it the amount of money needed for monthly mortgage payments.
James Jones, from Experian, said: “Perhaps surprisingly, middle class professional people in their early to mid-50s are most likely to be affected by the sting of rising interest rates – due to this group on the whole living for the now, despite being homeowners.
“For home owners who bought only in the last seven years they would have never experienced an interest rate increase. This increase in interest rates means that many will have to navigate the waters of higher mortgage payments for the first time when real wages are falling.
“A priority for homeowners should be to take ownership of their mortgage rates and put in place a few simple tactics to stay on top of their finances. Both budgeting and getting the important insight on your financial position by accessing your credit score can provide some of the easiest ways to ride the change.”
Experian has built a tool to help those with mortgages to see how the impact of the interest rate rise will impact their monthly repayments – available here.
