Some 46% don’t know that the current Bank of England base rate and 88% are unaware of its interest rate forecast for a rise in October 2015, according to research from Barclays Mortgages produced in partnership with the Centre of Economic Business Research (Cebr).
Some 61% of home owners are uncertain when interest rates might rise and half with variable rate mortgages aren’t aware their repayments could rise, the research also shows.
And overall 76% are not putting money aside to be able to cope with interest rate increases despite the Cebr predicting a minimum total mortgage payment rise of £723.8 million across the UK.
The research reveals that home owners cite different political and regulatory statements, conflicting family views and changing market commentary as the main reasons behind this widespread uncertainty.
The lack of awareness may contribute to UK mortgage holders experiencing financial difficulties in 2015, according to the research. Just under half, 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 home owners 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 201 (taking the base rate from its historic low of 0.5% to 1.25% by December 2015, something which is not considered unfeasible by economic experts and which would increase average mortgage repayments for individuals by £118.974.
The second 'medium' model focused on a single interest rate rise of 0.25% in May 2015 and would see home owners 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 home owner.
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.
The research report says that whatever the increase in repayments, it is clear that people are underprepared for any interest rate rise. The survey also found 45% 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.
‘Our report shows there is widespread confusion over interest rates and we encourage home owners to review their current situation and get advice on what their next mortgage step should be,’ said Andy Gray, Barclays managing director of mortgages.
‘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 home owners may be caught unaware by unexpected increased repayments,’ he added.
A breakdown of the figures show that 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 £158.9 million, despite 77% of home owners 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 home owners 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 home owners 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, home owners 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.
‘If predictions are accurate, across the country interest rate rises in 2015 will be a reality and the impact could stretch families who already feel financially squeezed. So we are working closely with StepChange Debt Charity to address concerns our customers may have over rising interest rates and the effect this may have on their mortgage repayments and wider household finances,’ Gray said.
According to Mike O'Connor, the chief executive for StepChange Debt Charity, many families' finances are on the edge and even a small rise in interest rates could have a serious impact. ‘People need to take action now and make sure that whenever those higher repayments come, the end result isn't a downward slide into problem debt,’ he added.
