News Article

Consumer Credit

British public remains divided over impact of interest rate rise – R3

By CreditMan Monday, September 28, 2015

Almost a third (31%) of British adults say an interest rate rise of one percentage point or more in the next 18 months would make them financially better off, while 31% say it would make no difference and 28% say it would make them worse off, according to research by insolvency trade body R3 and ComRes.

This is little changed from a year ago*, when 31% said an interest rate rise would make them better off, 31% said it would make no difference, and 25% said it would make them worse off.

Phillip Sykes, president of R3, says: “An interest rate rise would create ‘winners’ and ‘losers’ in roughly equal measure. However, an interest rate rise will have much more of an effect on those who expect to lose out than it will on those who expect to gain.”

“The cost of added interest on a mortgage of hundreds of thousands of pounds is much greater than the benefit of increased interest on savings of tens of thousands of pounds.”

Phillip Sykes continues: “The slight increase in the proportion concerned about the impact of a rate rise could allude to the fact debts have begun to rise again over the last year, following a lull caused by the recession. Access to credit has become easier recently.”

“An interest rate rise will be a big test for British household finances.”

The over-65s are the most likely to think they would benefit from a rate rise: 50% said it would make them better off and only 13% expect to be made worse off. On the other hand, 39% of those aged 45-54 said a rate rise would make them worse off; the highest proportion of any age group.

Phillip Sykes comments: “There is a very clear generational divide when it comes to the impact of interest rates.”

“The prolonged period of record low interest rates has had a particularly big impact on older people, many of whom are reliant on savings for income. The likelihood of someone over 65 entering insolvency has increased since 2009, whereas it has fallen for all other age groups.”

There were 5.3 insolvencies for every 10,000 adults over 65 in 2009, rising to 5.8 in 2014. By comparison, there were 30.9 insolvencies for every 10,000 adults of all ages in 2009, falling to 21.8 in 2014.

According to R3 and ComRes’ research, 89% of those aged over 65 say they have savings, the highest proportion of any age group.