A rise in the Bank of England base rate would plunge 30,000 borrowers into arrears in just 12 months, and is likely to come sooner than many expect.
This could push many borrowers who are currently on the brink of affordability over the edge, according to HML, which commissioned the research.
The threat could come in a little over a year's time, with HML predicting the first base rate rise in early 2015.
It forecasts that unemployment will hit 7% by the start of 2015, the trigger point for the Bank of England to consider raising base rates.
This would rapidly reverse recent progress made in bringing down the level of mortgage arrears in the UK.
HML's historical analysis showed that in the number of borrowers with three-month arrears increases by around 20% following an interest rate rise, while balances on arrears cases increased by 21%.
A base rate rises could tip 30,000 extra accounts into arrears of three months or more within one year, pushing up the average arrears by £700
Damian Riley, director of business intelligence at HML, said: “By the start of 2015, on current trends we would expect arrears to fall by another 10%. Any such fall could be negated following a modestly increasing interest rate, meaning the overall state of arrears in the mortgage market in 2015 could return to something like today’s level.”
Bank of England governor Mark Carney said the base rate would remain at 0.5 per cent until unemployment drops to at least 7%, unless inflation was to rise at a faster-than-desired pace or the low rate threatened financial stability.
While a base rate rise was expected at the end of 2015 or early 2016, HML forecasts this could occur in early 2015, while markets have priced in an earlier rise.
Spencer Dale, chief economist at the Bank, recently said the base rate could rise in 2014 if the UK was to experience particularly strong growth.
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