56% of mortgage holders ‘say cost-of-living squeeze to make payments a struggle’
26 June 2023, 14:54
Around 6% of mortgage holders whose fixed deal will end in the next two years said they would need to sell their home if rates continue to rise.
One in 10 (10%) mortgage holders feel they will not be able to afford their home loan if the cost of living continues to rise, a survey has found.
Two-fifths (41%) expect to make cuts elsewhere to be able to pay their mortgage, with some saying they would need to borrow money from family or friends.
More than half (56%) said the cost-of-living crisis will make it more of a struggle to pay their mortgage, according to research by insights agency Opinium.
Consumer Prices Index (CPI) inflation remained at 8.7% in May, despite hopes that inflation would slow and provide some relief for households.
Opinium’s research among 2,000 people across the UK was carried out between June 20 and 23.
On June 22, the Bank of England base rate was hiked from 4.5% to 5%, pushing up the average monthly payment for someone on a tracker mortgage by around £47.43 per month.
Many homeowners are sitting on fixed-rate mortgages and so are yet to feel the mortgage pain from 13 base rate hikes in a row.
Around 2.4 million fixed-rate products are due to end between now and the end of 2024, according to trade association UK Finance.
Among those in Opinium’s survey whose fixed mortgage deal is set to end in the next couple of years, 6% said they would need to sell their home if rates continue to rise.
One in seven (13%) believe they will need to ask for a mortgage holiday and one in 10 (10%) said they would need to temporarily switch to an interest-only mortgage.
Alexa Nightingale, head of financial services research at Opinium, said: “With the mortgage market in disarray following the latest interest rate rise announcement from the Bank of England, many homeowners will be feeling deeply concerned about being able to afford their mortgages – particularly those who are coming to the end of fixed-term deals in the near future.”
Chancellor Jeremy Hunt met with banks’ bosses on Friday last week and lenders representing over 75% of the market agreed to a “mortgage charter”, providing support for residential mortgage customers.
Among the measures, borrowers will be able to switch to an interest-only mortgage for six months, or extend their mortgage term to reduce their monthly payments and switch back to their original term within the first six months, if they choose to.
Both options can be taken without a new affordability check or it affecting their credit score.
Lenders have also agreed to implementing a 12-month minimum period before repossessing homes.
The measures are being rolled out by lenders over the coming weeks.
