UK homeowners are facing the worrying prospect of higher mortgage repayments when interest rates rise and research conducted by comparethemarket.com has found that mortgage-holding homeowners expect to pay, on average, almost £600 (£590) more a year on repayments if interest rates rise by 0.5%.

Collectively, for the 11.2 million UK homeowners with mortgages, that equates to £660 million more per year.

Given that additional cost burden, over half (55%) of those homeowners currently paying off their mortgages are worried about the prospect of interest rates rising. Not everyone, however, is aware of the potential hike in rates.

A third (32%) of homeowners are “unaware” of the likely rise in interest rates and a further quarter (25%) are “unaware” of how interest rate rises might affect them.

Comparethemarket’s data also reveals that increasing numbers of property owners are looking to remortgage now to take advantage of the historically low interest rates while they still can, with remortgaging enquiries now accounting for 42% of all mortgage enquiries.

Simon McCulloch, drector of isurance at comparethemarket.com, said: “Low interest rates may have spelled bad news for savers since 2008 but mortgage-paying homeowners have really benefitted. Our research has shown that, on average, mortgage repayments have been £112 less per month for every household since 2008.

"However, nothing lasts forever and, with the potential interest rates rise just around the corner, it’s good timing for those with mortgages to start shopping around to secure the best rates ahead of the rise.”

He added: “For first-time buyers, things are really tough. With increasing property prices outstripping wages and harder lending rules, getting on the property ladder remains challenging. It is not only vital that they shop around for the best available mortgage but even more important that they look at every opportunity to maximise their savings.

"Most of the best deals for savings accounts are offered to new customers, so spending five minutes online is really worthwhile."

Climbing interest rates are not bad news for everyone. Savers, having suffered from the low interest rates for six years, should start to see their money grow. That message has not completely filtered through to consumers.

The research also revealed that:

  • Two thirds (60%) of UK consumers have taken no steps either to lessen the impact or take advantage of the likely rise in interest rates.
  • While a quarter (25%) of respondents are shopping around, looking at different financial products to see how a rate rise might change the best deals offered by savings accounts and Cash ISAs, only 11% are looking to pay off loans early to avoid the rise.
  • Only five per cent are overpaying on their mortgages while the rate remains low.

There are, however, signs that the UK public’s appetite for switching financial products is growing. Mr McCulloch explained: “This research found that 39% of UK adults would switch their current banking products to other products that are offering better interest rates, even if this means switching provider.

"This is good news, as switching drives competition among providers which should, in turn, lead to better products, offering better rates. However, given that only 25% are actively shopping around, inertia remains a problem. More people should be encouraged to shop and switch - their finances should be healthier for it.”