As the Bank of England raises interest rate to 5.25 per cent, Advice NI has issued concerns the increase will have a negative impact on those struggling financially. Mortgage holders will be directly affected by the increase, including those coming out of low or fixed rate mortgages and transitioning into higher interest rates.
Kevin Higgins, Head of Policy at Advice NI flags that the charity is particularly worried about the effect it will have on social security benefits claimants.
He said, “The Support for Mortgage Interest (SMI) scheme is designed to help pay towards the interest on your mortgage or loans taken out for certain repairs and improvements to your home, yet we’re seeing a surge in service users who are reliant on the government SMI scheme and struggling to make ends meets. The interest rate used to calculate SMI currently sits at 2.65 percent, which is woefully inadequate for benefit claimants who are on a variable rate or coming to the end of a fixed rate deal.
“This week saw the launch of the ‘Consumer Duty’ report by the Financial Conduct Authority, designed to strengthen consumer protection rules across financial services and ensure firms act to deliver good outcomes for customers, but we know that many people are stressed and fearful with their household budgets being stretched to breaking point.”
Interest rate rise
According to UK Finance, it’s estimated that there are around 800,000 fixed-rate deals ending in the second half of 2023, while around 1.6M deals are due to end in 2024.
Sinead Campbell Head of Money, Debt and Quality at Advice NI adds that the increase in interest rates will also affect families and households not receiving social security benefits. Many of whom will be struggling to cope with a sudden surge in payments, putting them at heightened risk of falling into debt by prioritising mortgage payments over household necessities or facing mortgage arrears, to pay bills and put food on the table.
She says, “The Bank of England’s decision to raise interest rates will undoubtedly put additional financial strain on households and for those on variable rate mortgages the hike will immediately impact their budgets.
“We know more people will turn to credit to ease financial pressure during this time, however this will only add more stress in the longer term. Advice NI is here to ensure that no one is left feeling alone, overwhelmed or unsupported during these challenging times.”
Advice NI is urging households and businesses facing financial difficulties to proactively seek support and get in touch with its free, impartial and confidential Debt & Money Service.
Sinead concludes, “If you are struggling with your mortgage or other financial repayments, please get in touch. Our expert advisors can the first step in helping find a solution and can offer advice on extending the term of your mortgage, making a temporary switch to interest-only payments, a temporary reduction in repayments or taking out a part interest-part repayment plan.”
Advice NI and its members have dealt with over 4,100 cases of household personal debt in the last twelve months, managing over £34.3M in more than 7,700 agreements, signalling that there is often an available solution for people struggling.
