Over half of homeowners will struggle if mortgage rates increase
Equifax research reveals UK consumers are managing their finances – but also highlights the importance of understanding credit information to gain new credit
YouGov research* commissioned by credit information provider, Equifax, reveals that over 50% of UK homeowners believe an interest rise of 1% would have a negative effect on their finances. They said they would struggle financially to meet an increase in their monthly mortgage repayment. Homeowners in the East Midlands topped the table of those who feel the most negative at 16%, with their neighbours in the West Midlands topping the table for those who feel the most positive about coping with an interest rate rise at 8%.
There have been mixed messages about when interest rates might rise – but it’s widely believed that a rise will occur at some point in the next 6-9 months. This has alarmed some homeowners who fear that a sudden increase in mortgage rates could catch them unawares. This fear is underlined by figures from the YouGov research commissioned by Equifax which reveals that many homeowners don’t know how an interest rate rise could affect their ability to meet their monthly mortgage repayments.
“The issue that many homeowners are currently facing is the uncertainty surrounding interest rates”, explained Andrew Webb, Sales & Marketing Director of Equifax Personal Solutions. “When asked how much a potential rise of 1% would affect their monthly mortgage repayment, 40% of homeowners did not know, with those living in Wales the least certain at 57%.
“While a third of the homeowners we surveyed are currently protected by a fixed rate mortgage, many are already thinking about how they can prepare for any rise that occurs before their fixed rate deal ends. For these individuals, an early review of their financial commitments could help them to prepare for a future mortgage application.
“According to our research, many homeowners see value in cutting back on their lifestyle spending, including holidays and socialising, in order to account for potential increases in essential future expenditure” continued Andrew Webb. “Homeowners looking to apply for a new mortgage as part of that process should be aware that their current financial behaviour could impact their ability to get the mortgage they want. This is particularly important as lenders are required to conduct more rigorous affordability assessments following the introduction of the Mortgage Market Review at the end of April.”
When applying for a mortgage, credit information can be used to confirm an individual’s identity and assess their likely ability to repay. Equifax believes it’s important, therefore, that homeowners understand what information is available to lenders, in order to address any areas that may affect their ability to get the best mortgage for their circumstances.
For example, dormant or unused credit accounts are still likely to be considered as available credit during an affordability assessment and could impact any offer a lender is willing to make. Likewise, missed payments may cause concern for lenders if viewed as an indication that the applicant lacks responsibility in repaying debts or is already financially stretched.
“We suggest anyone planning to apply for a new mortgage or remortgage in the next 6 to 12 months keeps track of their current financial commitments and regularly checks their credit report to ensure that it remains accurate and up to date” concluded Andrew Webb.
The Equifax Credit Report is accessible for 30 days free simply by logging onto www.equifax.co.uk/Products/credit/credit-score.html. If customers do not cancel before the end of the 30 Day Free Trial, the service will continue at £14.95 per month, giving them unlimited online access to their credit information and weekly alerts on any changes to their credit file. It also includes an online dispute facility to help them correct any errors on their credit file simply and quickly.
**All figures, unless otherwise stated, are from YouGov Plc. Total sample size was 4,733 adults of which 1,524 adults own their home on a mortgage. Fieldwork was undertaken between 8th – 12th May
For further press information, please contact: Clare Watson, Cecile Stearn, Parm Heer or Wendy Harrison at HSL on 020 8977 9132 / Fax: 020 8977 5200 or email: firstname.lastname@example.org
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