Mortgage holders are making big changes to their finances – from cutting pension contributions to downsizing – to cope with dramatically higher monthly payments, a new survey shows.
Faced with either the immediate reality of higher mortgage costs or the prospect of a sharp rise in payments once an existing deal has expired, more than 1,000 mortgage holders were asked this month by KPMG whether they had either already taken, or were considering taking, action to deal with this.
About 18% said they had raided their savings in order to reduce what they owed, while 25% said they were considering doing this.
When it came to moving at least part of the mortgage over to interest-only, so the household clears just the interest that accrues on that part, thereby cutting monthly repayments, 16% said they had already done this, and 24% said they were thinking about doing so.
Some people are able to extend the length of their mortgage term, which reduces the monthly payments, and of those polled by KPMG, 12% said they had done this, while 25% were considering such a move.
Others have turned to the more extreme measure of selling up and moving to a cheaper home, with 8% saying they had already done so, while more than one in five (22%) were thinking about it.
Meanwhile, 11% said they had cut their pension contributions, with 20% considering doing this.
The findings were part of KPMG’s latest Consumer Pulse research tracking how more than 3,000 people across ages, income groups and UK regions say they are responding to the cost of living crisis.
Linda Ellett, the firm’s UK head of consumer markets, retail and leisure, said: “Inevitably, increased household budget and savings being used to pay the mortgage, or higher rent costs, will continue to lead to less money being spent elsewhere within the economy by consumers, which will continue to challenge retailers, brands and leisure businesses.”
However, there was a glimmer of good news for homeowners and prospective buyers, with separate data from Moneyfacts showing more fixed-rate mortgages priced at below 5% going on sale this week as the Bank of England looks poised to pause the series of interest rate rises imposed to curb inflation.
On Wednesday, HSBC launched some deals with five-year fixed rates starting at 4.9%, while on Thursday, NatWest will offer deals from 4.89%.
Meanwhile, the average new five-year fixed-rate residential mortgage is edging closer to falling back below the 6% mark.
Moneyfacts said that across all deposit sizes on the market, the average new deal was priced at 6.03% on Wednesday – edging down from 6.04% on Tuesday.
