One in four mortgage holders will miss monthly payments if they rise by £100, says Citizens Advice

One in four mortgage holders will be unable to afford a £100 increase in monthly payments and almost half will be in trouble if they rise by £250, says Citizens Advice

  • Citizens Advice research highlights risk if rates continue to rise
  • One in 7 mortgage holders have already cut the essentials to save money
  • Mortgage rates have skyrocketed after the unfortunate mini-budget
  • Borrowers who come to the end of fixed agreements face a harsh mortgage shock

More than a quarter of mortgage holders could not afford their monthly payments if they were increased by £100 a month, according to new research from Citizens Advice.

Almost half (45 per cent) could not make their payments if they increased by £250 a month, the organization said.

In September, 49 percent of Citizens Advice mortgage holders gave debt advice and said more money was coming out of their finances each month.

Counting the cost: Rising mortgage rates have left 1 in 7 borrowers cutting back on essentials to make ends meet, according to Citizens Advice

Citizens Advice estimated that this applied to around 11 per cent of all UK mortgage holders.

The compelling findings highlight the risk surrounding rising mortgage rates. Average rates continue to top 6 percent after sharp increases over the past month.

On September 23 (the day of the mini-budget), the average rate for a two-year fixed mortgage across all deposit sizes was 4.74 percent, according to Moneyfacts.

Just over a month later, on October 28, it stood at 6.53 percent. An increase of that magnitude would add £134 to monthly payments on a £200,000 mortgage over 25 years, or an additional £1,608 per year.

The average for a five-year solution is now 6.36 percent.

Experts are warning of a looming mortgage crisis, as borrowers who locked in their rates two or more years ago will have closed much cheaper deals and see their costs skyrocket.

Last year, Nationwide launched a product with a rate of just 0.87 percent, with a 40 percent deposit.

At the time, TSB had an even cheaper offer of 0.84 percent for remortgages.

Up: Mortgage rates have risen sharply in recent months as the rising cost of borrowing has pushed up prices for homeowners.

Up: Mortgage rates have risen sharply in recent months as the rising cost of borrowing has pushed up prices for homeowners.

The problem is further compounded by the cost of living crisis driven in part by inflation rates.

The consumer price index rose 10.1% in the 12 months to September 2022, up from 9.9% in August.

One in seven mortgage holders have already cut back on essentials, while one in ten have taken out high-cost loans to make ends meet, according to a Citizens Advice survey.

For mortgage holders with a negative budget and who can no longer meet their loan payments, the numbers rise to one in four cutting back and almost one in five using high-cost credit.

Data from Citizens Advice paints a bleak picture of a looming foreclosure crisis if borrowers can't pay their monthly bills.

Data from Citizens Advice paints a bleak picture of a looming foreclosure crisis if borrowers can’t pay their monthly bills.

In a blog accompanying the data, Citizens Advice Senior Policy Manager David Mendes da Costa and Policy Manager Rachel Beddow wrote: “When people can’t pay their mortgage, one of three things happens.

‘They can miss mortgage payments and fall behind. They can cut essential expenses on items like food and energy. Or they can use credit to fill the gap and get more in debt.

Mortgage lenders should consider how to help people in financial difficulty through measures such as restructuring payments, deferring payments, and eliminating additional fees and charges.

‘Of these three, it is the first where people are better protected. Mortgage lenders should consider how to help people in financial difficulty through measures such as restructuring payments, deferring payments, and eliminating additional fees and charges.

“But the concern is that people don’t get this support and instead go without essentials or get deeper in debt.”

According to Costa and Beddow, the FCA and the Bank of England are currently recording their lowest level of mortgage delinquencies in 15 years. However, they warn that this may be a sign that people are not reaching out for help and risk deepening their debt or struggling without essentials.

You can contact Citizens Advice or call Adviceline (England) on 0800 144 8848 or Advicelink (Wales) on 0800 702 2020.

What to do if you need a mortgage

Borrowers who need to find a mortgage because their current fixed-rate agreement is coming to an end, or because they have agreed to purchase a home, have been urged to act but not panic..

Banks and building societies continue to lend and mortgages are still being offered and applications accepted.

However, rates are changing rapidly and there is no guarantee that the deals will last and not be replaced by mortgages that charge higher rates.

This is the best Money Mortgage Rate Calculator powered by L&C that can show you offers that match the value of your mortgage and property

What if I need to re-mortgage?

Borrowers should shop around and talk to a mortgage broker and be prepared to act to secure a rate.

Anyone with a fixed-rate agreement ending within the next six to nine months should consider how much it would cost to remortgage now and consider closing a new agreement.

Most mortgage deals allow fees to be added to the loan and are then only charged when you withdraw. By doing this, borrowers can lock in a rate without paying expensive setup fees.

What if I am buying a house?

Those with agreed home purchases should also aim to lock in rates as soon as possible, so they know exactly what their monthly payments will be.

Homebuyers should be careful not to overstretch themselves and be prepared for the possibility of house prices falling from their current high levels, due to higher mortgage rates limiting people’s borrowing capacity.

How to Compare Mortgage Costs

The best way to compare mortgage costs and find the deal that’s right for you is to talk to a good broker.

You can use our best mortgage rate calculator to display offers that match your home value, mortgage size, term, and fixed rate needs.

Keep in mind, however, that rates can change quickly, so the advice is if you need a mortgage, compare rates and then speak to a broker as soon as possible, so they can help you find the right mortgage for you. .

> Consult the best fixed-rate mortgages that you could apply for

Commercial