A survey carried out by debt management plan providers PayPlan, found homeowners wanted to be shown a graph which illustrated how a rise in interest rates would affect repayments and whether the lender planned to implement rate changes in line with the Bank of England.
Borrowers said they wanted budget guidance from their adviser so that they could plan for future increases and clarity over who they should call if they felt they would struggle to keep up with rising rates.
When borrowers were asked how they would cope with mortgage repayment increases, 54% said they would have to cut back on essential living costs while 20% said they would have to reduce other payment costs. Just 6% said they would consider switching mortgage.
Respondents said they would find it useful to be shown a part-and-part mortgage illustration and a reduction in exit fees during mortgage application discussions.
Speaking at a mortgage lending conference earlier this week, chief executive of debt charity StepChange Mike O’Connor said the cut in tax credits proposed by George Osborne posed a bigger risk to households’ budgets than a rise in interest rates.
“Cuts to welfare support could significantly redraw the debt landscape,” O’Connor said.
A quarter of those surveyed by Payplan said they were ‘extremely worried’ about rate rises.
Peter Munro, head of creditor partnerships, said: “Our research shows that there is a real concern about rate rises but there is little dialogue between lenders and borrowers about it. Customers are used to low rates and little or no increases and this means tough sacrifices will have to be made to cope with repayment increases.”
Osborne’s proposals have currently been delayed by the House of Lords. He intends to reveal modified plans during the Autumn Statement on 25 November.