Number of homeowners battered by rates, cost-of-living crisis and inflation set to grow, expert warns
Up to 23% of UK borrowers fear they will struggle to keep up with their mortgage payments in the next 12 months, according to a new report by RFI Global.
The firm’s latest UK Mortgage Council bi-annual survey of more than 2,000 UK consumers shows that the proportion of borrowers expecting to struggle to make mortgage repayments in the next 12 months increased significantly from 15% this time last year (H1 2021).
The report also noted that the rising cost of living and rising mortgage rates were “the primary drivers of this increase”.
Meanwhile, the proportion of borrowers who said it was not a good time to buy had almost doubled since early last year from 14% to 32%.
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Jess Garrett, insights manager for consumer credit, deposits and payments at RFI Global and one of the report’s authors, said more people were concerned about the rising cost of living now than during the height of the COVID pandemic.
“We saw that 23% of people now have mortgage stress. They're concerned about the repayments and being able to pay them in the next 12 months, and it was only 20% in the pandemic, which I think is quite surprising.
“But this trend is likely going to continue into the future, and that's something that's quite important and that (we should) be aware of.”
Explaining the contrast between the two, she said mortgage holders were offered more support during the pandemic two years ago through stamp duty holidays, which is not the case now. In addition, borrowers are also having to cope with higher interest rates and the overall cost-of-living crisis.
“We can see that 91% people are extremely concerned about inflation and the rising cost of living. It’s a time of worry for mortgage holders and something that they see is affecting their finances as well. That could potentially be why we are seeing mortgage holders that are slightly more concerned and stressed about making their repayments in comparison to the pandemic,” she added.
The survey found that inflation was the primary concern for borrowers, with the majority (65%) reporting that they were concerned about the impact that inflation will have on them this year.
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Up to 43% of borrowers also said they were worried about the impact of further interest rate rises.
Closely linked to mortgage rates is the rate of inflation, which rose to 10.1% last month, up from 9.4% in June.
However, there is little sign there will be a let up in the coming months. According to the latest forecast by Goldman Sachs, inflation could hit 22% next year, well beyond the Bank of England’s prediction earlier this month that it would top 13% by the autumn.
Regarding mortgage types, Garrett said the recent BoE’s interest rate increase to 1.75% would have the greatest impact on those households with a variable or tracker mortgage rate (about 21% of the total) rather than those with fix rate deals.
“Our data shows that borrowers are clearly concerned about interest rate rises, particularly with the cost of almost every other item of household expenditure increasing at the same time,” she said.
“Households with fixed rate deals will be protected from rising interest rates for some time, but those whose deals are ending soon are in for a shock. With no clear end for the cost-of-living crisis, everyone is worried.”
The survey also found that 30% of borrowers would value information from their lender on different options available to them and that 28% would value information on how rate rises would impact them, highlighting the need for mortgage professionals “to be on the front foot with their communication to customers”, the report added.
Garrett said education was crucial, particularly for those borrowers who lacked sufficient experience in the housing market.
“They want this information to make more informed decisions. And it also highlights the opportunities for lenders to be able to offer this to their customers,” she said.
