"With the cost of borrowing continuing to increase across the board, the knock-on impact could be huge - particularly for those who are already struggling with other unsecured debts."
Ahead of the expected Bank of England interest rate rise on Thursday, debt advice specialists are warning consumers about the impact the additional increase could have on the concerning levels of unsecured debts among homeowners.
Data from Creditfix shows that the average level of unsecured debt among homeowners struggling with their personal finances is almost £29,000, 78% higher than the average among non-homeowners.
The challenge is particularly pronounced among younger homeowners, where the average level of personal debt for people aged between 18 and 29 is just over £23,000, 83% higher than non-homeowners.
Average debt levels among homeowners are also significantly higher than the national average of Creditfix customers, which currently stands at just over £17,000.
With base interest rates currently at 2.25%, homeowners on a tracker or variable rate mortgage will be impacted immediately by an additional increase on 3rd November, as will those with a fixed-rate nearing expiration.
Supporting this, Moneyfacts data shows that many two and five-year fixed mortgage rates are now rising as high as 6.7%.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, warned that rates reaching 6% would lead to an average household refinancing a two-year fixed rate mortgage in the first half of next year will see monthly repayments rise to £1,490, up from £863.
Alongside the wider cost of living crisis, including huge increases to the cost of energy and other essentials, Creditfix’s debt specialists are warning about the knock-on impact on homeowners.
Lindsay McMenemie, head of advice at Creditfix, said: “It’s no secret that the cost of living crisis is causing a huge financial headache for so many people and an increase in mortgage rates is just another additional cost for homeowners to consider alongside rising energy and food costs.
“Mortgage repayments are rightly the first consideration when assessing outgoings and, with the cost of borrowing continuing to increase across the board, the knock-on impact could be huge - particularly for those who are already struggling with other unsecured debts.”
Principal financial adviser at Almond Financial, Sam Robinson, has noted changes in the buying habits of both existing homeowner and those wishing to get themselves on the property ladder: “With skyrocketing monthly mortgage payments, we have seen a reduction for first-time buyers and home movers of around 60% in the last few months. We have also seen an increase in slow chains causing clients to lose great rates from June, forced on to rates of 6% and deals falling through. Now, more than ever, people are understanding how important the role of a financial adviser is during uncertain times.”
