14 July 2023
If you are covering the latest ONS analysis of the impact of increased cost of living on adults across Great Britain, please see the following comment from Karen Noye, mortgage expert at Quilter:
“Harrowing figures from the Office for National Statistics show that one in four adults in the UK are now experiencing financial vulnerability, illustrating just how many people are struggling to afford even the bare necessities as cost-of-living pressures pile on. One in 20 people reported they are unable to put food on the table, and more than a third (35%) of adults are finding it difficult to afford their rent or mortgage payments.
“Mortgage holders and renters are among those with higher odds of experiencing financial vulnerability, and this will largely be due to soaring mortgage interest rates and higher rent costs. Indeed, 27% of people reported that their rent or mortgage costs had caused their cost of living to increase compared to just a month ago. While this figure is already relatively high, it suggests there are still a lot of people who are shielded by previous fixed rate mortgage deals. As more people’s deals run out and they are faced with the prospect of drastically higher rates, we can expect this figure to increase significantly.
“Given mortgage rates have hit the highest level for 15 years, with the average two-year fixed mortgage rate reaching 6.6% earlier this week, an increasing number of people will struggle to afford their rising payments. The recent Mortgage Charter will give homeowners a bit of breathing space, and it is vital that people stay calm and speak to their lender or mortgage broker if they have any issues. Lenders do not want to deal with defaults on their loans and they are there to help in the first instance.
Three tips if you are struggling with your mortgage bills
Don’t bury your head in the sand
"Lenders will normally write to you within 15 days of a missed payment but if you are struggling with your bill, it is crucial that you talk to your lender before they contact you. Burying your head in the sand will only make things worse. Mortgage debt is what is described as a priority debt and as the name implies should be prioritised above most other types of debt you have.
Work out what you can afford to pay back
"Before picking up the phone to your lender, take some time to work out exactly how much you can afford to pay back each month. There are budgeting tools available online or you could speak to a debt charity or Citizens Advice. If you have sought help, do let your lender know as showing that you have looked at ways of paying back your debt shows you’re serious about it, and can help avoid repossession orders down the line.
Discuss ways of making payments
"Lenders have a duty to act fairly with customers who are having difficulties, and the recent Mortgage Charter requires them to offer significant support. Having a frank conversation with your lender can help them find a way for you to avoid the problem spiralling out of control. Lenders might be able to put you on a payment plan based on what you can afford to pay back. This could mean providing options to extend your mortgage term, or if your home is worth more than the mortgage, you might be given the option of adding your arrears to the total amount you owe and pay it back over the lifetime of the mortgage. We recommend that you seek advice from a qualified mortgage professional before opting for any plan, as some plans may end up with you paying much more interest over the lifetime of your mortgage."
