Interest rate rises on revolving credit, including credit and store cards, could cost UK homeowners an additional £2.8bn in the next 12 months, new estimates have suggested.

This is according to research commissioned by specialist mortgage lender, Pepper Money.

Pepper Money’s findings showed that 12.7 million homeowners could be hit with an annual increase of more than £750 in interest rate payments on their credit cards, store cards and overdrafts over the coming year.

A flurry of successive interest rate increases have seen the Bank of England’s Monetary Policy Committee raise its base rate from 0.1% last December, to 1.75% at the Committee’s latest meeting at the start of August.

This latest research, conducted on behalf of Pepper Money by YouGov, indicated that 3.8 million homeowners are already feeling the impact of these rising rates, as the average interest cost on their revolving credit has increased by more than £60 a month in the last six months alone. This means that they could be spending an additional total of £2.8bn in interest payments on revolving credit in the next year.

Pepper Money CEO, Laurence Morey, commented: “We know that, with costs rising, the monthly commitment of servicing short-term debts such as credit cards, store cards and overdrafts, can stifle the ability of many families to meet their monthly outgoings, particularly when the cost of such credit is also increasing.

“We also know that, in the right circumstances, consolidating expensive short-term credit onto a longer-term loan at a lower rate, can help to put families in greater control of their cash flows enabling them to normalise their finances, as they pay down that credit over the longer-term.

“Our average headline initial rate available to new homeowner loan applications is 6.1%, which compares favourably to other forms of lending such as unsecured loans and credit cards. In the current environment, this ability to refinance onto a lower rate could provide thousands of borrowers who have built up enough equity in their property with the respite they need to manage their monthly finances and navigate this difficult period.”

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