Some 750,000 Britons are in danger of defaulting on their payments and lenders are being called on to do more for those who are most vulnerable. The Government regulator has set out ways this can be done including reducing mortgage rates, allowing longer time to complete repayments and switching to interest only. Interest rates have been made following the Bank of England’s decision to hike the base rate to control inflation.
Currently, the base rate is at 3.5 percent and the latest Consumer Price Index (CPI) inflation rate for December came to 10.5 percent.
However, one of the consequences of this is that homeowners have seen their mortgage payments rise in recent months.
Later this week (February 2), the central bank is likely to raise the base rate once more to four percent, an increase of 0.5 percent.
For the average property in the UK which costs £270,708 with a 75 percent loan-to-value, this rate increase would mean monthly mortgage repayments will rise by another £52.
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As a result, homeowners will be forced to pay an additional £430 each month compared to when the Bank of England’s interventions start in December 2021.
According to the Bank of England, monthly repayments on around four million owner-occupied mortgages are expected to go up over 2023.
In its role as regulator, the Financial Conduct Authority (FCA) has confirmed that more than 750,000 households are at risk of mortgage default as interest rates rise.
In light of this, property market analysts are urging those affected to reach out to their lender as soon as feasibly possible.
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Alastair Douglas, the CEO of TotallyMoney, emphasised why getting any available help from lenders is crucial for the 750,000 homeowners on the verge of defaulting.
He explained: “If you’re one of the 750,000 homeowners at risk of defaulting on your mortgage in the next two years you must contact your lender as soon as possible.
“The Financial Conduct Authority recently instructed firms to support borrowers with measures which included allowing customers to make lower repayments, switch to interest-only, or moving to a different rate.”
There are consequences that arise if someone either chooses to not pay or inadvertently misses their mortgage repayments.
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TotallyMoney’s chief executive broke down how this could impact the lives of people in big and small ways.
Mr Douglas added: “Missing a payment could impact your ability to access credit for years to come.
“Not just for big ticket items like loans and mortgages, but also for things like mobile phone contracts and car insurance.
“Lenders usually check a customer’s credit report during the application process, and the best deals are reserved for those with the best scores.”
Outside of mortgage holders, other borrowers are in less than an ideal financial situation going into the new year.
Credit card interest rates are at their highest in 25 years and unsecured personal loan rates are growing at their fastever ever pace.
The Bank of England’s Monetary Policy Committee (MPC) is due to announce changes to the base rate on February 2, 2023.
Any changes to interest rates or support from lenders will likely be announced shortly after this announcement.
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