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|New concern for Britons likely to be at the sharp end of interest rate rises|
|Thursday, 14 January 2016|
Nearly four in 10 people contacting National Debtline for help with their finances are not aware that interest rates may rise in the near future, prompting fresh concern for those in existing financial difficulty who are likely to be at the sharp end of interest rate rises when they arrive.
38 percent of National Debtline clients surveyed by the Money Advice Trust, the charity which runs the free debt advice service, were not aware of the possibility that interest rates may rise at some point over the next year. This is despite the significant impact that the rise and its knock-on effects may have on their finances.
The findings come a week after the Chancellor of the Exchequer George Osborne warned Britons to prepare for interest rate rises in a high-profile economic speech in Cardiff. The Money Advice Trust surveyed 641 callers to its National Debtline advice service over a four month period to poll awareness of rate rises amongst those who are already in debt.
More than three quarters of those National Debtline callers who were aware that interest rates may rise were concerned about the impact this would have on their financial situation (76 percent). A similar number (77 percent) said they expected to have to cut back on their household spending to help cope with interest rate rises when they do arrive.
The Money Advice Trust is today warning that the government, financial services industry and advice agencies face a significant challenge in helping households to prepare for a higher-interest rate economy – and in particular, those who are already in financial difficulty.
The charity is also concerned that public debate around the impact of interest rate rises has so far centred around households with mortgages only, ignoring the impact of those in private rented accommodation who are likely to face higher rents as landlords pass on the additional cost to their tenants.
Joanna Elson OBE, chief executive of the Money Advice Trust, the charity that runs National Debtline, said: “The Chancellor’s warning to Britons to prepare for higher interest rates was welcome, but the evidence suggests we face a huge challenge in getting this message across. This is particularly true of those with existing financial problems, who will be at the sharp end of interest rate rises when they do arrive.
“After nearly eight years of ultra-low rates, we need to do much more as a society to prepare people for a higher interest rate economy. That means government, the financial services industry and advice agencies like National Debtline working together to communicate clear, consistent messages to the public on what steps they should take.
“It is likely, of course, that rises will be slow and gradual, and will not cause hardship for the majority of homeowners in an economy that is recovering. For many of the people we help at National Debtline, however, even a small rise could make a financial situation that is already difficult, much worse.
“Crucially, we need to recognise that this challenge goes far beyond people with mortgages. Higher interest rates are likely to cause difficulty for private renters too, as landlords pass on their additional costs to their tenants. The need to prepare those in private rented accommodation for higher costs is just as important.”
Previous research by the Building Societies Association has found that over half (52%) of borrowers say they will struggle when interest rates rise, with one in ten believing that they would experience real financial problems, falling behind on a range of loan commitments.
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