Interest rate rises on revolving credit, including credit and store cards are predicted to cost Brits an extra £2.8bn

The lender found that 12.7 million homeowners could be hit with an annual increase in interest rate payments on their credit cards, store cards and overdrafts, of more than £750 in the coming year.

The research conducted by YouGov, found that 3.8 million homeowners are already feeling the pinch, as the average interest cost on their revolving credit has increased by more than £60 a month in the last six months alone.

This means that they could be spending an additional total of £2.8bn in interest payments on revolving credit in the next year.

Laurence Morey, CEO at Pepper Money, said, “We know that, with costs rising, the monthly commitment of servicing short-term debts such as credit cards, store cards and overdrafts, can stifle the ability of many families to meet their monthly outgoings, particularly when the cost of such credit is also increasing.

“We also know that, in the right circumstances, consolidating expensive short-term credit onto a longer-term loan at a lower rate, can help to put families in greater control of their cash flows enabling them to normalise their finances, as they pay down that credit over the longer term.

“At Pepper Money, we undertake regular in-depth analysis of how our customers circumstances evolve after talking a Pepper Money homeowner secured loan to ensure we are achieving our mission of helping our customers succeed, and the data shows that the debt consolidation loans that we advance are to hard working people with good credit scores and good incomes.

“For example, the median salary of our homeowner loan customers is £54k, which compares to the ONS median average UK salary of £31k. Often these people have run up large balances over a long period of time and they are taking proactive steps to normalise their circumstances.

“In doing so, they are also often improving their credit profile, and we see average credit scores increasing in the period after taking their consolidation loan.

“They are also doing so whilst maintaining a comfortable buffer of equity in their homes. The average LTV on our second charge lending is just under 70% when taking account of their existing first charge mortgage.

“It’s an option that is already helping many responsible families to take control of their finances and we see this becoming even more important over the next year as interest rates on revolving credit continue to rise and the squeeze on living costs continues.”