A recent survey by consumer organization Which? has revealed that an estimated seven million households in the UK are facing difficulties in keeping up with their rent or mortgage payments. This alarming trend is driven by the increased cost of borrowing, as millions more households are set to remortgage at higher rates by the end of 2024.
The survey, which gathered responses from 4,000 people, found that nearly half (46%) of households with mortgages or those who are renting have been grappling with housing payment challenges. This equates to around seven million households across the UK.
Bank of England data has already shown that nearly half of all mortgage holders, approximately 4.5 million households, have experienced increases in their monthly mortgage payments. Despite the recent decision by the Bank of England to maintain interest rates, the pain of higher rates is yet to come for nearly a third of homeowners, roughly 2.1 million households, whose fixed-rate mortgage deals will expire by the end of 2024. This scenario raises concerns that millions more households may soon struggle to afford their housing costs.
The impact of rising interest rates is not limited to lower-income households, as demonstrated by the concerns expressed by individuals with higher incomes. For instance, one man from Northern England, earning between £55,000 and £79,999, shared his anxiety about covering bills, particularly his mortgage, which is expected to renew later in the year with anticipated further interest rate increases.
Renters are also susceptible to the effects of interest rate hikes, as landlords facing higher mortgage repayments may raise rents to offset the increased costs. This situation has sparked worries among renters, with many expressing concerns about impending rent hikes that could strain their finances.
The financial pressures on households have led to adjustments in their budgets, with nearly a third (31%) of mortgage holders tapping into their savings to meet housing bills, marking the highest rate among all housing tenures. Private renters (27%) and social renters (25%) have also resorted to their savings to cover rent, depleting their emergency funds and limiting their ability to capitalise on higher savings rates.
The stress of managing housing payments has taken a toll on people’s emotional well-being, with more than half of households with a mortgage (52%) and the majority of social renters (55%) and private renters (56%) reporting daily stress. Additionally, over half of these groups feel like they are not in control of their finances (55% of mortgage holders, 55% of social renters, and 56% of private renters).
As households grapple with making ends meet and remortgaging decisions loom, Which? is calling on banks and mortgage lenders to ensure they are well-prepared to support a high volume of customers seeking assistance. This includes adequately staffing and resourcing customer service support through phone calls, email, and chat.
For those concerned about their ability to meet mortgage repayments, it is advisable to contact their lender, as this will not impact their credit score. Lenders can offer various support options tailored to individual circumstances, such as temporary mortgage holidays or extending the mortgage term. Renters should also discuss their situation with their landlords to explore temporary solutions.
The Financial Conduct Authority’s new Consumer Duty, which holds financial firms to higher standards of customer service, is expected to ensure that customers receive the support they need throughout these challenging times. Companies that fail to meet these standards could face regulatory action.
Rocio Concha, Which? Director of Policy and Advocacy, emphasised the need for support and action, saying, “Banks and mortgage lenders must also ensure they are fully staffed and properly prepared to properly support customers getting in touch to remortgage or because they are struggling to make ends meet.”
