Mortgages  

Mas partners with lenders to increase rate rise awareness

The Money Advice Service is working with mortgage lenders to raise consumer awareness of forthcoming interest rate rises and how they can prepare for them.

Speaking to FTAdviser, Caroline Rookes, chief executive at Mas, said it is working with the Royal Bank of Scotland and others to increase awareness.

“We’ve got a very active partnership strategy where we work with a whole range of organisations on all sorts of different bases, so with RBS we are working together to think about how we can alert customers to the need to think about interest rate rises and what they should do.

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“Our philosophy is we want the maximum amount of help to be available to the maximum number of people.

She added: “We are not precious about them coming through Mas if, by syndicating tools or content, people get the help they need through some other source.”

A spokesperson for Mas said that the partnership with RBS is just one example of where the firm was reaching out to people in the same space to educate consumers.

The spokesperson said: “When they go and visit the RBS website or Natwest they will find a whole range of tools where they can look at what the impact of ‘X’ per cent rate rise would be on their mortgage payment.”

Ms Rookes also mentioned that Mas is working with the Department for Work and Pensions on universal credit to try and get personal budgeting embedded in the journey. “It’s not that we are providing advice on universal credit per se because that’s not our responsibility.

“The people that will be on universal credit are the people on low to middle income who probably need most help with personal budgeting, and what we would like to do is to embed some sort of help with budgeting in the process of claiming universal credit.”

Recent research published by the Bank of England revealed that around 6 per cent of home owners would have a debt-serving ratio of at least 40 per cent if mortgage interest rates rise by 2 per cent.

Assuming a 10 per cent increase in income for all households, a 2 per cent rise in mortgage interest rates would be likely to raise the proportion of mortgagors with a debt-servicing ratio of at least 40 per cent to around 480,000 households, up from the curent 360,000.

But the impact would be more severe in a second, less likely, scenario where there was assumed to be no increase in incomes.

Futhermore, data from NMG Consulting revealed that 37 per cent of mortgagors would need to take action if interest rates rose by 2 per cent while income remained unchanged, equivalent to 12 per cent of all households.

ruth.gillbe@ft.com