Based on the Financial Flexibility report by Barclays Mortgages, if interest rates rise at ‘moderate’ levels to they would hit 1.25% by December 2015, while in a ‘drastic’ model they could hit 1.75%.
On average UK monthly mortgage repayments would move from £666 to £687 based on the moderate model.
Andy Gray, Barclays managing director of Mortgages, said: “In the face of a rise in mortgage rates and in the cost of living, it is vital for homeowners to review their current situation and get advice as to what their next mortgage step should be so they remain financially flexible in the face of rate rises to come.
“The impending rise in mortgage rates that we can see from these scenarios will undoubtedly squeeze some homeowners.
The report found that for the 20% of households with the lowest incomes, over 50% of monthly income is committed to mortgage repayments.
Single-parent families were identified as particularly susceptible to rate rises, as it was found that 37% of their monthly income was committed to mortgages.
Gray added: “With some clear advice and greater planning homeowners will be better equipped for any financial changes and get the right mortgage product for them.
“The overarching insight is that rates will rise in the medium term and so mortgage customers should be aware of the impact of any rises on their finances and review their mortgage arrangements accordingly.”
Londoners will suffer most from rate rises on a monthly basis as the cost of a mortgage in the capital will increase by £384 each year per household on average, rising from £12,384 per year to £12,768 on the moderate model. Under the drastic model Londoners will see a rise to £13,308.
Mortgage holders in Wales currently pay the lowest at an average of £483 monthly or £5,796 annually, and they would see payments rise by £180 each year according to the moderate model.
Homeowners in the South West of England meanwhile who currently pay an average of £683 monthly or £8,196 across the year would see their repayments rise more greatly by £252 each year.
UK mortgage holders currently pay a total of £69.2bn annually, which would rise to £71.4bn with a moderate rate rise.