An extra 356,000 homeowners could be struggling to pay their mortgages by the end of June 2024, in addition to around 200,000 who are already behind on payments, according to the City regulator.
The figure is down on a previous estimate made last September that an additional 570,000 borrowers could become financially stretched by the end of June 2024, the Financial Conduct Authority (FCA) said. It has fallen because the regulator based it on a projected peak interest rate of around 5.5%, which has now been revised to 4.5%.
The FCA defines mortgage borrowers as being financially stretched if more than 30% of their gross household income was going towards mortgage payments and they were not currently in a payment shortfall. Among this group, those rolling off a fixed-rate deal could expect to pay an additional £340 a month on average, according to the regulator.
The FCA released the latest estimate as it confirmed its guidance setting out the ways that mortgage lenders can help customers worried about or already struggling with their mortgage payments because of the rising cost of living. The regulator says it expects firms to support people in financial difficulty.
The guidance covers options such as extending the term of their mortgage or making reduced monthly payments for a temporary period. However, the FCA warns that even temporary changes may result in higher monthly payments in future or paying back more overall.
Mortgage borrowers should consider carefully any steps they take and customers who can keep up with their payments should continue to do so, the FCA added. Sheldon Mills, executive director of consumers and competition at the FCA, said: “Our research shows most people are keeping up with mortgage repayments, but some may face difficulties.
“If you’re struggling to pay your mortgage, or are worried you might, you don’t need to manage alone. Your lender has a range of tools available to help.
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"Get in touch as soon as you have concerns, don’t wait until you’re about to miss a payment before doing so. Just talking to them about your options won’t affect your credit rating.”
The FCA’s research indicates that borrowers aged 18 to 34 are more likely to be financially stretched than the rest of the working age population. Those living in London and the South-East, where house prices are higher than the UK average, are also particularly likely to be stretched.
Being stretched does not necessarily mean borrowers will miss payments as some will be able to use savings, reduce spending or increase incomes to help meet their mortgage commitments. As well as contacting their lender for support, worried borrowers can also visit MoneyHelper for money tips, budgeting tools and to find free debt help.
Lenders have proactively contacted customers a combined total of 16.5 million times, across a range of channels, to offer support in the past year, the FCAsaid. They expect this to increase this to 20.5 million contacts over the next year.
Lenders supported more than two million customers to manage their finances in the past year, including through budgeting tools, access to debt advice, and tailored mortgage forbearance. The FCA said it will continue to monitor the mortgage market and how firms are supporting their customers.
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