Homeowners expecting huge rise in mortgage payments over next 2 years

Soaring interest rates continue to fuel concern among homeowners, with 80% surveyed who have a mortgage worried about their ability to afford their outgoings over the next year.

Related topics:  Finance,  mortgages,  homeowners,  Rates
Property | Reporter
19th September 2023
advice
"When we last conducted this research homeowners expected their monthly payment to rise by £176.84, however this has now increased substantially, posing more of a challenge for borrowers who are already being hit with rising costs elsewhere"
- Steve Griffiths - TML

New research by The Mortgage Lender has found that mortgage borrowers expect their monthly payments to increase by an average of £617 due to rising interest rates.

The research found that 80% of homeowners reported being concerned about the effect of rising rates, with 37% being extremely concerned and 43% being somewhat concerned.

This worry is especially prevalent among younger homeowners, with 25–34-year-olds being the most worried (88%) among the age groups. With renting cheaper than a first-time buyer mortgage in some areas of the UK for the first time since 2010, it is not a surprise that the younger generation is concerned about the affordability challenges within the market.

This anxiety is only increased as many mortgage products approach renewal. Over one in ten (11%) of mortgage borrowers say they need to renew their mortgage in the next six months, and 14% will renew their mortgage between six months and a year.

Many will face a steep increase in how much they’re paying each month. When asked how much more homeowners expected their mortgage to rise per month, the average consensus was £617.45. This is a stark contrast to the same question asked in November 2022, when the average expected increase was over £400 lower at £176.84.

Encouragingly, of the same property owners who expect their mortgages to increase, over a quarter (28%) are speaking to their mortgage lender, and a quarter (25%) are speaking to their mortgage broker ahead of their renewal, in the hope of finding the best possible deals.

Other pathways being explored include looking for a higher paying job (18%), taking out a mortgage with a longer-term (13%), borrowing money from their parents (9%), going back to work (7%), selling their property, and moving back to renting (5%), and some (4%) are considering selling their BTL property.

However, 19% aren’t doing anything to account for higher mortgage costs. 18% are drawing on long-term savings, which while a fix in the short term could leave them in a vulnerable financial position later down the line.

Steve Griffiths, Chief Commercial Officer at TML commented: “With rates rising steadily over the last year, homeowners have been living with this new reality for a while now. However, as many mortgages start coming up for renewal, the affordability challenges within the market are starting to hit more mortgage borrowers.

"Indeed, when we last conducted this research homeowners expected their monthly payment to rise by £176.84, however, this has now increased substantially, posing more of a challenge for borrowers who are already being hit with rising costs elsewhere.

“It is encouraging that a significant number have taken proactive steps to address these challenges head-on. Speaking to a broker or lender can help demystify the challenge, allow you to understand all your options and guide you to the route that will work best for you and your circumstances.”

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