"It’s clear that there needs to be more support for those remortgaging or on tracker or variable rates who will be feeling the impact of rising monthly payments"
New research from Moneyhub Decisioning has highlighted that millions of homeowners could be at risk of defaulting on their mortgage if interest rates rise again, with 26% admitting that a further hike would mean they won’t be able to afford their mortgage payments.
The research also found that 35% of homeowners who currently have a mortgage are concerned that they will not be able to afford their mortgage when they re-mortgage due to soaring rates.
ONS data shows that an estimated 1.4million people in the UK are set to re-mortgage in 2023 alone, with figures from Refinitiv revealing that 1.5million are estimated to be on standard variable rates and a further 85,000 have tracker mortgages, according to UK Finance.
Young people, who often have thin credit files or poor credit scores, are particularly vulnerable to a further rate rise with 44% saying that they are concerned about affording their mortgage if there were another rate increase. Londoners are also at risk, with 51% of homeowners with a mortgage in the capital admitting that they were concerned about affording repayments should rates rise.
UK Finance recently found that the number of households in mortgage arrears rose last quarter. With more set to struggle with repayments, it's clear more needs to be done to support homeowners.
Suzanne Homewood, Managing Director, Decisioning at Moneyhub, comments: “Times are challenging for homeowners. Mortgage rates continue to rise to levels not seen since before the financial crisis and other essential costs are eroding financial buffers, leading to a complex situation and increased risk for both consumers and lenders.
"It’s clear that there needs to be more support for that remortgaging or on tracker or variable rates who will be feeling the impact of rising monthly payments.
"With Moneyhub’s Open Finance-powered Decisioning tools, lenders will be able to understand their customers’ financial circumstances better and offer products that are based on their current and historic spending patterns and behaviours, and therefore what they can actually afford.
She adds: “In addition, whilst providers stress-test a customer’s finances at the point of sale, they are not aware if/when a customer’s circumstances change and therefore if the product is still suitable.
"With the FCA’s new Consumer Duty regulations coming in next month, it’s vital that banks and lenders can prove products that are suitable for their customers across the life cycle of the product. Holistic, timely and relevant communication to those that could be falling into financial stress via Open Finance will support better outcomes, which has to be good for everyone”