"Next year is going to be critical for people" says head of financial services firm
Almost half of people worry about their mortgage repayments, with a staggering 42% admitting they don’t have any savings to fall back on should they get into financial trouble, according to research by MetLife.
The 12-page report carried out by the financial services company concluded that 48% of borrowers have expressed concern about missing mortgage payments - up from 37% last year.
In addition, 71% of people say they will be unable to cover their mortgage repayments for more than two months, leaving almost three-quarters of borrowers exposed if they stop earning their usual income, MetLife added.
The research was carried out shortly after Kwasi Kwarteng’s infamous mini budget last September, which caused the pound to plummet and lenders to withdraw more than 1,000 mortgage products.
Although lenders have returned to the market, offering mortgages at lower interest rates, the ripples are still being felt in the housing sector.
The head of individual protection at MetLife, Rich Horner (pictured), warned that the industry will see the full impact when people have to re-mortgage their homes.
“If they come to the end of a two-, or five-year fix, or however long they’ve got, it’s going to mean a substantial increase in their mortgage payments that may not have been budgeted for. It’s going to be hard,” he said.
Read more: "We’re going to see more vulnerable customers in the next 12-18 months"
With almost three quarters of people admitting they would be unable to cover mortgage repayments much beyond two months without the safety net of a living wage is also a red flag for Horner.
“It’s a concern. Unemployment is not something we cover, but that is a definite risk that the people face in the market,” he added.
Given the steep rise in the cost-of-living, Horner was asked whether borrowers would be put off from having to pay extra for mortgage protection, especially as 61% of people surveyed by MetLife said they did not have mortgage protection because the policies were too expensive.
“The early indicator for us is that people are still very willing to pay money for insurance because they can see the benefits of it. We haven’t seen an increase in cancellations - people will tend to cancel other things rather than protection, because it’s something they value and don’t want to lose. It’s become very important,” he said.
Most income going towards mortgage
The discussion coincided with a separate report from the Evening Standard showing that Londoners now spend 75% of their income on their mortgage.
Robert Gardiner, chief economist at the Nationwide Building Society, revealed the data, adding that the number was higher even than in the run-up to the 2008 financial crisis.
Horner described the report as “incredible”, adding: “It just shows the need for protection - having something there to fall back on. Next year is going to be critical for people to protect themselves - there is still a lot of uncertainty.”
The high number of borrowers in a potentially perilous financial situation is all the more worrying as property prices have started to fall (down by an average of £4,500 in November).
However, MetLife’s research also threw up some surprising figures, as 73% of all 18- to 24-year-olds polled said they have a mortgage protection policy in place, against an average of 48%.
Horner said: “It really made me scratch my head when I saw that. For an 18- to 24-year-old who’s managed to get on the mortgage ladder, (it shows) they are savvy. I bet they are protecting their mortgage because they have worked really hard to do it.”
Intermediaries crucial
Horner stressed the importance of the role of intermediaries in the current financial climate, pointing out that MetLife would not be able to function without their help.
“It’s great that we’re talking about this because there are still not enough people that have protection. Without intermediaries - without financial advisors - we wouldn’t reach any customers, as you can’t buy products directly from MetLife. The advice and guidance they provide is invaluable. Those payments could make a huge difference.”
Have you experienced a rise in the number of customers who are worried about repaying their mortgage? Mortgage Introducer would like to hear from you. Let us know in the comments section below.
