A new report released by Hargreaves Lansdown warns that by the end of 2023, remortgaging will swallow an extra 3.1% of income after tax.
This represents an 80% increase in energy bills and could lead to more than a quarter of mortgage payers, just over two million households, being at risk of default.
According to the report, 347,000 homeowners are at “critical risk” due to the fact they don’t have the financial resilience to cope with the extra costs.
They’re already spending more cash each month than they have coming in and don’t have emergency savings to ease the remortgaging hit.
The report highlights that singletons, younger people, Londoners and the self-employed will be particularly at risk, with 38.5% of Londoners remortgaging this year classed as at risk. Meanwhile, younger owners will make up 61% of the increase in those at risk.
Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “This year we face a remortgage lottery. The losers are those whose fixed deals run out by the end of the year, who’ll take a hit that’s equivalent to an 80% hike in their energy bills.
“Our modelling shows that two million households will be at risk of falling into arrears, but because the cost-of-living crisis has taken a massive toll on financial resilience, almost a million people will be wrestling with even worse problems.”
The report also reveals that 650,000 homeowners are at “high risk” due to the fact that they are not only facing a dangerous hike in their mortgage payments but also have less than the minimum recommended emergency savings.
The HL Savings & Resilience Barometer update on the risks of remortgaging is released today and was put together with Oxford Economics. The full report is available on the HL website.
