More than 700 homeowners a day are at risk of missing a mortgage payment, figures show.
Falling interest rate expectations mean fewer people will struggle to borrow and the FCA has told lenders told to better support customers.
Laura Suter, head of personal finance at AJ Bell, comments: “The outlook for homeowners is bleak, but not as bleak as it was. On top of the people who have already missed a mortgage payment, the regulator thinks another 356,000 homeowners are at risk of falling behind by the end of June 2024. This means more than 700 homeowners a day* are at risk of missing a mortgage payment and falling into arrears.
“But the good news is that this is a significant drop on the FCA’s previous expectations – the previous estimate expected 570,000 borrowers to hit financial problems by the end of June next year. We have falling interest rate expectations to thank for that, as they are now expected to peak at 4.5% rather than 5.5%, meaning those coming to re-mortgage later this year won’t face such eye-watering increases in their repayments.
“There is no hiding from the fact that the mortgage market is a terrifying place for the 1.4 million homeowners coming off a cheap fixed-rate deal onto far higher rates this year. While average mortgage rates have dropped since the aftermath of the disastrous mini-Budget last year, they are still significantly higher than the rates many homeowners are on. As these figures lay bare, for many homeowners the increase in costs will make their mortgage unaffordable, particularly in light of rising costs almost everywhere else in their spending.
“Younger people and those living in more expensive areas, such as London and the south-east, are at the highest risk of struggling to make payments, because they often have a toxic combination of having borrowed up to the max and not having sufficient savings to help bail them out. The unaffordable nature of getting on the property ladder in London means that many buyers have funnelled all of their money into buying a home, and have left nothing to fall back on.
“The FCA wants mortgage lenders to up their game when it comes to supporting customers who are struggling with repayments, offering things like payment holidays, reduced repayments for a period, switching to interest-only or extending the mortgage term to cut monthly costs. It also wants to bust some myths for those struggling with repayments, reassuring them that enquiring about help won’t have a negative impact on their credit file and that lenders should offer tailored support.
“Anyone struggling with repayments shouldn’t bury their head in the sand. Instead they should approach their lender to at least find out their options and weigh up which might work best for them. If they want an independent opinion they could speak to a charity like Citizens Advice to get more advice.”