Research conducted by Barclays Mortgages, in association with the Centre of Economics and Business Research (CEBR), has found that 61% of home-owners in Britain don’t know when interest rates are going to rise, or by how much it will affect their monthly payments. The Bank of England have strongly suggested that there will be an interest rate rise in late 2015 of 0.25% initially.
Reasons for this gap in consumers’ knowledge has been attributed to “conflicting and contradictory statements from politicians, regulators and experts”, so much so that 46% of those surveyed didn’t know what the current base rate is. The most dramatic statistic of all, perhaps, is that 88% didn’t know the Bank of England had made an announcement involving interest rates at all, meaning that a sudden rise could prove very unexpected and push some into financial difficulty.
The CEBR have projected that home-owners “could face the collective £1.1bn increase if there were three rises of 0.25% each” by December 2015. Mortgage payments could increase “by an average of £118.97 per household by the end of the year.” Even one rise of 0.25% could cost home-owners an extra £80 a month.
Barclays’ take on the results was to encourage more awareness. “We want our customers to remain financially fit in the face of potential interest rate rises in 2015”, Andy Gray commented. “…some homeowners may be caught unaware by unexpected increased repayments.”
Interest rates have been at a low of 0.5% since 2008, and though it doesn’t bode well regarding mortgage repayments and a sudden increase, many savers and those with ISAs are awaiting the rise. The Telegraph’s Andrew Oxdale and Sophie Christie have, however, warned savers and investors that subsequent rises beyond the first 0.25% may not affect those with ISAs and savings.
For those who want an even higher rate of return than that which will be offered by banks and building societies, Peer-to-Peer lending and investing is proving to be a popular alternative. They are not comparable as products (P2P is not covered by the FSCS, unlike bank products and conventional savings accounts) and have many differences, but Peer-to-Peer, much like crowdfunding, is becoming a favourable option for many investors. Lenders have the added benefit of encouraging small businesses and property throughout Britain, as their money actively funds various projects and developments.
Capital is still at risk if a borrower defaults.
Find out more about P2P and view Wellesley & Co’s rates here.