Homeowners will spend a further £1.6billion on unsecured loan repayments over the next 12 months
“Some unsecured loans are fixed rate, but many have a variable rate that can increase with interest rate increases.”
It revealed that 7.7million homeowners could be hit by an annual increase in interest payments of over £900 on their unsecured loans, including car loans.
Research by YouGov found that 7.7 million homeowners currently have at least one unsecured loan. Of these, 15% have already seen the interest rate charged on their unsecured loans increase in the past six months, with the average increase being more than £900 a year. Over the next 12 months, that means UK homeowners could spend an additional £1.6billion on interest payments on unsecured loans.
Paula John, Independent Mortgage Specialist, said: “The skyrocketing cost of living is putting a strain on everyone’s finances as the price of basic necessities like food and fuel continues to rise. The situation is exacerbated because rising interest rates mean that the cost of borrowing has also increased. So customers with outstanding credit, such as unsecured loans, could also see their payments increase. Some unsecured loans are fixed rate, but many have a variable rate that can increase as interest rates rise. And that means the cost of paying interest is also rising, putting further pressure on their finances.
Laurence Morey, CEO of Pepper Money, said: “We know that the monthly commitment to repay short-term debt such as personal loans can put additional pressure on family finances if the cost of servicing these loans increases. In these circumstances, consolidating these debts by refinancing on a homeowner’s loan at a lower rate could potentially give families better control of their finances, allowing them to repay this credit in the longer term.
“Debt consolidation may not be the right solution for everyone, but many families could benefit from a proactive approach to managing their monthly interest payment expenses. Analysis of our own loans at Pepper Money shows that debt consolidation loans are given to normal people with above average incomes who are simply looking to restructure their finances.Often these people have accumulated large balances over a long period of time and consolidation of debt gives them the opportunity to better control their monthly interest payments.