Industry experts have raised concerns over the impact of rising mortgage rates on pension savings, after analysis from Moneyfacts revealed that the average two-year fixed-rate residential mortgage has hit a 15-year high of 6.66 per cent.

The Office for National Statistics (ONS) also recently confirmed that renters (4.7 higher odds) and mortgage holders (2.0 higher odds) had higher odds of experiencing financial vulnerability compared to those who own their home outright.

The impact of this financial strain is already being seen in pension saving activity, as research from Saltus found that more than a fifth (22 per cent) of high-net-worth-individuals (HNWIs), those with over £250,000 of investable assets, are reducing their pension contributions to combat rising rates.

A further 22 per cent also said that they are looking to cut their pension contribution to help their children cover their costs, revealing that eight in ten HNWIs are helping to support their children financially.

However, Saltus partner, Mike Stimpson, warned that whilst reducing pension contributions may seem like a good solution, people need to be wary of cutting back on longer-term investments in order to cope with the current strain.

"Many will now need to revisit their retirement plans to ensure they are still realistic given this hit to their pension pots," he added.

Research from PensionBee raised similar concerns, after revealing that almost half (46 per cent) of those over the age of 55 who are paying off mortgages are worried about rising rates, continuing to meet repayments and how to pay their loans off in full.

The research, carried out in June, showed that three quarters (76 per cent) of respondents over age 55 who have mortgages are worried about rising interest rates, while 62 per cent are concerned about how they will manage their payments to the end of term.

Respondents aged over 55 with a household income of less than £30,000 were more worried about rate rises than average (83 per cent) and also about managing repayments to the end of the term (72 per cent).

Many also remain unsure as to how they will tackle these costs, as almost half (46 per cent) of mortgage holder respondents aged 55 or over admitted they are unsure how they will pay off their mortgage in full.

Using a capital lump sum was the most common way savers were hoping to pay off their mortgage in full, cited by 22 per cent of respondents, although 16 per cent were looking to use their pension, 11 per cent planned to sell the house, and 5 per cent were turning to equity release.

Commenting on the findings, PensionBee director of public affairs, Becky O’Connor, suggested that the current mortgage rate rise shock may be contributing to an "abrupt rethink" of retirement plans, also causing worry among the population of older homeowners still repaying loans.

However, she also warned that while it may be tempting to tap the pension to pay off a home loan with mortgage rates rising, savers must consider the potential impact of using up tax-free cash early on in retirement and then running the risk of not having enough money later on to maintain enough income for a decent living standard.

“Pensions are designed to provide this income. While it can make sense to use some of the pot to pay off mortgages, it’s good to be aware of what this can do to living standards in retirement," she said.

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