Two-fifths (42%) of people are finding it very or somewhat difficult to afford their mortgage and rent payments, according to a newly published Office for National Statistics (ONS) survey.
This represented a significant hike, compared with 35% during a similar period last year.
Among those currently paying rent or a mortgage, 45% reported that their rent or mortgage payments had gone up in the past six months.
Meanwhile, 51% of adults reported that their cost of living had increased compared with a month ago, 46% reported it had stayed the same and only 3% said it had decreased.
To deal with rising costs, 67% were spending less on non-essentials, 50% were shopping around more, and 45% were spending less on food shopping and essentials.
In light of these findings, Newspage sought the opinions of mortgage professionals.
Reaction:
Craig Fish, director at Lodestone Mortgages & Protection:
“The results of this survey are not unexpected but are a very worrying sign of things to come.
“Considering the relentless increases in the base rate and the cost-of-living crisis, you might have expected a larger increase year on year.
“However, many people are still benefiting from low fixed rates on their mortgage. When they come to review and experience significantly increased mortgage payments, it’s likely that these numbers are going to get much worse.
“The Monetary Policy Committee needs to pause now and let things settle, otherwise the financial fallout could be brutal.”
Justin Moy, managing director at EHF Mortgages:
“While these figures are worrying, we haven’t seen the worst of the mortgage crisis just yet, with another 400,000 deals ending by the end of the year and a further one million renewal deals in 2024.
“Targeting borrowers to correct a UK-wide issue of high inflation will end up with a complete disaster of an economy and ultimately more Government bailouts.
“We are on the precipice of a recession and the Government needs to act now. Their strategy at the moment has more holes than Raac.”
Jamie Lennox, director at Dimora Mortgages:
“This data comes as no surprise to many. What is alarming is that this is only the tip of the iceberg and more pain is likely to be felt in the next 12 months as more mortgage holders roll off record low fixed rates.
“This, combined with the rise in unsecured credit levels, would indicate more people are leaning on credit cards just to keep afloat.
“Sadly, at some point, this bubble will pop and could lead to mass arrears across the board.”
Darryl Dhoffer, mortgage expert at The Mortgage Expert:
“These are stark figures indeed and highlight the real pain renters and mortgage holders are currently experiencing.
“The Monetary Policy Committee seems to believe that disposable income today is more than during the recession of the 1990s and the Credit Crunch of 2008, but they need to wake up and smell the coffee.
“These are real figures with real pain experiences that will only get worse as the year unfolds.”
Riz Malik, founder and director at R3 Mortgages:
“When you have depleted your savings and cut back all the non-essentials, there is little else to do.
“Unfortunately, people will continue to struggle and the only certainty is that the Government will do little to support them.”
Gary Bush, financial adviser at MortgageShop.com:
“This data is sad reading however the general public needs to know that most qualified financial practices have arrangements in place to assist them through these times.
“On the other side of the coin, we are still seeing packed shopping outlets, long queues at supermarkets and hardly any space at coffee houses and eateries.
“I am not sure how deep this survey actually goes into the UK population?”
Stephen Perkins, managing director at Yellow Brick Mortgages:
“Whilst these figures paint a horrific picture of the current state of household finances, I am surprised that year on year the percentage of people struggling to pay their mortgage or rent has only increased by 7% given the increases in mortgages, rents and all the other costs of living.
“The Bank of England themselves say it takes 18 months for the full impact of an interest rate rise to be seen, so with so many such rises over the last 12 months and so many mortgages yet to come off their low fixed rate deals the worst is yet to come.
“Cutting back on non-essentials is papering over the cracks for now, but such measures can only go so far.”
Graham Taylor, managing director at Hudson Rose:
“These worrying figures show that the cost-of-living crisis is still very much in full swing.
“We are seeing the real effect of the base rate increases, leading to those coming off fixed-rate mortgages starting to feel the pinch.
“With more mortgages set to roll off their historic low rates, expect these payment worries to increase in the coming months.”
Kundan Bhaduri, property developer and portfolio landlord at The Kushman Group:
“It is no wonder that this Government’s anti-business, anti-landlord stance has started to show its results, in the real world.
“Rents are becoming increasingly unaffordable because of the completely bizarre interest rate scenario, and the fact that lenders have to stress test mortgages at unrealistic rates (150% of interest cost at 8%, for example when yields are at 5 to 6% in most parts of London).
“The lobby groups that antagonise landlords are equally to blame. Remember, it is private funds that is propping up the PRS at the moment.
“If it becomes onerous, disingenuous and a lot more red tape added to the process of investing that capital, the money is simply going to move elsewhere.
“That’s the reality and the actors involved in this are to blame for it.”
Samuel Mather-Holgate, independent financial advisor at Mather and Murray Financial:
“The last 18 month has been catastrophic for homeowners and renters. The Government wound up all support for energy bills, tax thresholds didn’t increase so more of their money went to the Government and the Bank of England set out on a campaign to make living comfortably unaffordable.
“The results are in, and they achieved their goal. This data isn’t surprising, given the catalogue of assaults on our bank balances, but it is shocking nonetheless.
“More than four in 10 people are finding it difficult to pay their mortgage or rent.
“This is a clear indication that the central bank had gone too far several months ago, but has kept up its pressure on households and the effect of the most recent rate hikes is yet to translate into these figures.
“Unless Andrew Bailey reverses these rate cuts we could have a homelessness crisis in the UK, like never seen before.”
Graham Cox, founder at Self Employed Mortgage Hub:
“The ONS survey illustrates the stark choices people face. And unfortunately for many, the pain is still to come, as millions face having to remortgage at 3 to 4 times their current mortgage rate.
“As renters and homeowners alike batten down the hatches, the knock-on effects for the wider economy are huge, and we’re likely to have a sharp recession in 2024.”
Joshua Gerstler, chartered financial planner and owner at The Orchard Practice:
“Now is the time when we will see more people suffering. Although mortgage rates have been high for a while, and rents have been increasing, people have been on fixed rate deals on their mortgages or on ASTs for the rental.
“Now that rates and tenancies are ending, they are being renewed and are now much more expensive.
“This, combined with the soaring inflation over the past couple of years, is now really hitting many people hard.
“It can be tempting at times like these to look to cut spending in areas such as life insurance and income protection, but I urge people to keep these important policies. First, look to see if you can save in non-essential areas such as TV subscriptions.
“You can always watch Freeview TV but you cannot get a £1m life insurance payout if you don’t pay your premiums.”
Charles Breen, founder and director at Montgomery Financial:
“In recent weeks, numerous headlines have centred around the looming mortgage shock as borrowers transition away from fixed-rate mortgages.
“This is causing heightened anxiety, especially among low-income homeowners who are already grappling with financial challenges and possess limited financial cushioning to withstand potential future economic shocks.
“Many individuals with mortgage commitments have experienced a significant surge in housing-related expenses.
“The increase in housing costs and reduction in people’s spending power is sadly what is needed to get inflation under control.
“Sadly, this strategy disproportionately affects those with the least amount of financial fortitude and resilience the most.”
Ranald Mitchell, director at Charwin Private Clients
“The ONS data is unsurprising in many respects as inflation, interest rate hikes and pressure on landlords to increase rents continue to create financial pressures.
“Many are cutting back on non-essential expenditures, which is expected in times like this, but worryingly, 45% of people are cutting back on essentials.
“That is a number the Government and Bank of England need to think long and hard about.
“We are in a period of recalibration right now and the new normal is bedding in. Mortgage interest rates are very unlikely to return to the ultra-low decades, landlords will not be reducing rents and the cost of essentials will remain similar to its current levels.
“Wage demands will increase putting pressure on employers and ultimately, we are likely to see a rise in unemployment if this scenario unfolds.”
Richard Campo, founder at Rose Capital Partners:
“It’s no surprise to learn that 42% of people are struggling to pay their rent or mortgage.
“With the Bank of England increasing rates by 300% in the last 12 months alone (from 1.75% to 5.25%), mortgage rates have followed suit, as have rents.
“That is a huge shock to the system. That alone would be manageable, but this is also at a time of hyperinflation of well over 10% of the majority of that time.
“I think this also shines a light on the huge level of unsecured debt in the UK, which sits at a staggering £11,000 per household.
“While this is a very painful transition out of an ultra-low interest rate environment that we have all become accustomed to over the past 13 years, the positive to take away will be there will be a greater focus on paying off debt which will be good for individuals and the economy in the long run.
“That will require some behavioural change of not ‘Ubering’ meals and ‘Amazoning’ whatever you want to buy. So, while painful medicine, I feel that the patient needs it.”
Peter Stamford, director and lead adviser at Moor Mortgages:
“The recent survey hints at a looming crisis, with many still enjoying low mortgage rates but for not much longer.
“As these rates expire, we risk a spike in financial hardships, with homeowners leaning more on credit to get by.
“The current Government strategy seems insufficient to prevent a potential economic slide. It’s a wake-up call demanding a shift in approach to avoid worsening the current struggles.”
