A small interest rate rise would hit many Yorkshire households

The research found that at least a third of British adults ​with these loans would find it​ ​difficult, or no longer be able to afford to repay the debt​,​ on a bank loan (43​ per cent​), an overdraft (39​ per cent​), a​ ​Personal Contract Purchase (PCP) car loan (37​ per cent​), or outstanding credit card payments (35​ per cent​)​.​

Figures for Yorkshire and the Humber suggest that 62​ per cent​ of adults in the region with payday​ ​loans would find it difficult​,​ or no longer be able to afford to repay the debt​,​ if interest rates rose by one​ ​per​ cent, as would 58​ per cent​ of adults in the region with bank loans; 42​ per cent​ with an overdraft; 33​ per cent​ with a mortgage; 35​ per cent​ with a Personal Contract Purchase (PCP) car loan; and 28​ per cent​ with outstanding​ ​credit card payments.

Across Britain, 4​ per cent​ of adults with an overdraft, bank loan, or a PCP car loan say a one per​ cent interest rate rise would mean they could not afford to repay the debt at all.

Eleanor Temple, chair of R3 in Yorkshire and a barrister at Kings Chambers in Leeds, sa​id​: “Even​ ​following the recent rise in the base rate from 0.25 to 0.5​ per cent​, interest rates are still near historic lows.

​"​It’s worrying that our research found that even a small increase in the rate they pay on credit would​ ​cause problems for so many. Vulnerability to a financial shock like an interest rate rise is widespread​. P​eople just don’t have much financial wriggle room.

“Credit is no longer limited to luxuries but can often be the only way people can afford to pay for a​ ​place to live, a car to get to work in, or even to pay for basics, like food or energy bills. An interest rate​ ​rise could bring thousands of people a step closer to the edge.”

The survey also found that 23​ per cent​ of adults in Yorkshire do not have any savings at all at the moment,​ ​while 43​ per cent​ are worried about their current level of debt.

Ms Temple ​said: “When credit is as cheap as it is now, it masks the financial problems that​ ​people are having and stores problems up for later. Compounding the problem, low interest rates​ ​encourage people to take on more debt than they otherwise would, which means the delayed hit to​ ​finances is worse than it could have been when the cost of debt increases.

“The recent rise in the Bank of England’s base rate should act as a warning of what may be to come.​ ​With interest rates so low for so long, it can be easy for credit to be taken for granted. The idea of​ ​interest rates going up is an alien one to anyone has only taken on credit in the last ​10 years – they​ ​will never have experienced a rate rise at all. It’s notable that quite a few people are unsure what​ ​impact an interest rate rise will have on the cost of their debt.”