Interest rate driven increases in mortgage costs are worrying more UK families, who have seen expenditure and debt rise faster than household income, according to a report from Aviva.
The report revealed that the fear about rising mortgage rates is up 7 per cent – with more than a quarter of the population listing this as one of their top three financial concerns.
This follows on from a recent YouGov survey for the Council for Mortgage Lenders which found more than a quarter of homeowners believe they will face financial difficulty when mortgage rates rise, with the number of people struggling likely to be greater than the number reporting ‘healthy’ finances within three years.
Furthermore Aviva found that while family income has risen to £2,012 a month on average - up four per cent in six months - families have seen a three per cent increase in expenditure and are taking on more debt.
However, the insurer’s research also found that more families are taking steps to protect themselves from the unexpected, with increasing numbers taking out life insurance, income protection and critical illness cover.
Aviva’s data showed that the average family home is worth £244,100; the largest figure ever recorded by their Family Finances Report series.
More people are taking out protection insurance for their families, including life insurance (42 per cent versus 36 per cent six months ago), health insurance (15 per cent versus 13 per cent), critical illness cover (16 per cent versus 11 per cent) and income protection (10 per cent versus 7 per cent).
Families are also juggling debt, which has soared to £16,300 per household, against £7,840 six months ago, reversing the sharp drop seen between July and December last year.
The average credit card debt is now £2,940, up from £1,720 six months ago, while the amount owed to payday lenders has more than tripled from £350 to £1,290.
More families are saving regularly, with the proportion who save nothing each month now at a record low of 24 per cent, but the average monthly amount put away has dipped slightly and savings cushions have declined to £1,770 against £2,274 six months ago.
The data was sourced from the Aviva Family Index which used findings from over 24,000 people.