Millions of homeowners could be at risk of defaulting on their mortgage if interest rates move upwards again, according to research by Moneyhub Decisioning.
Moneyhub’s research found that a quarter (26%) of homeowners with a mortgage said a further interest rate rise would mean they could not afford their mortgage payments.
A further third (35%) were concerned that they would not be able to afford their payments when they remortgage, due to rising rates.
An estimated 1.4 million people in the UK are set to remortgage in 2023, and with 1.5 million estimated to be on standard variable rates (SVRs) and a further 85,000 with tracker mortgages, a considerable number could be in the red following a further rate rise.
Young people, who were more likely to have thin credit files or poor credit scores, were particularly vulnerable to a further rate rise, with 44% expressing concern about affording their mortgage in the event of another rate increase.
Londoners are also at risk, with 51% of homeowners with a mortgage in the capital admitting that they are concerned about affording repayments should rates rise.
The research was published following predictions that the Bank of England’s Monetary Policy Committee (MPC) is set to raise the base rate again on 22nd June.
Suzanne Homewood, managing director, decisioning at Moneyhub, said: “Times are challenging for homeowners.
“Mortgage rates continue to rise to levels not seen since before the financial crisis and other essential costs are eroding financial buffers, leading to a complex situation and increased risk for both consumers and lenders.
“It’s clear that there needs to be more support for those remortgaging or on tracker or variable rates who will be feeling the impact of rising monthly payments.
“With Moneyhub’s Open Finance powered Decisioning tools, lenders will be able to better understand their customers’ financial circumstances and offer products that are based on their current and historic spending patterns and behaviours, and therefore what they can actually afford.”
She added: “In addition, whilst providers stress-test a customer’s finances at the point of sale, they are not aware if/when a customer’s circumstances change and therefore if the product is still suitable.
“With the FCA’s new Consumer Duty regulations coming in next month, it’s vital that banks and lenders can prove products that are suitable for their customer across the life cycle of the product.
“Holistic, timely and relevant communication to those that could be falling into financial stress via Open Finance will support better outcomes, which has to be good for everyone.”
