One in four mortgage holders won’t be charged monthly payments if they increase by £100, says Citizens Advice

More than a quarter of mortgage holders wouldn’t be able to afford their monthly repayments if they increased them by £100 a month, according to new research from Citizens Advice.

The organization said nearly half (45 per cent) would not be able to make their payments if they went up by £250 a month.

In September, 49 percent of Mortgage Advice holders gave Citizens Debt Advice to say they have more money going out of their finances each month than going into it.

Citizens Advice has estimated that this applies to around 11 per cent of all mortgage holders in the UK.

The stark results highlight the dangers of high mortgage rates. Average rates continue to climb above 6 percent after sharp rises over the past month.

On Sept. 23 (Mini Budget Day), the average rate for a two-year fixed-rate mortgage across all deposit sizes was 4.74 percent, according to Moneyfacts.

Just over a month later on October 28, it settled at 6.53 percent. That much higher would add £134 to the monthly payments on a £200,000 mortgage over 25 years, or an extra £1,608 per annum.

The five-year average repair is now 6.36 percent.

Experts warn of a looming subprime mortgage crisis as borrowers who set their rates two years or more ago will have entered into much cheaper deals and will see their expenses go up.

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

At the time, TSB had a cheaper 0.84 percent offer for remortgage.

This issue is further exacerbated by a cost-of-living crisis driven in part by inflation.

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

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

For mortgage holders on a negative balance sheet who are already unable to afford their borrowing payments, the numbers rise to one in four, and almost one in five are using high-cost credit.

In a blog accompanying the data, Citizens Advice principal policy director David Mendez da Costa and policy director Rachel Biddo wrote: “When people can’t afford their mortgage, one of three things happen.

They could miss mortgage payments and be late. They can cut back on basic spending on items like food and energy. Or they can use credit to bridge the gap and go deeper into debt.

Of these three, this is the first place where people are best protected. Mortgage lenders need to think about how they can help people in financial difficulty through measures such as restructuring payments, providing payment deferrals and removing fees and surcharges.

“But the concern is that people are not receiving this support and instead are going without necessities or going deep into debt.”

According to Costa and Bideau, the FCA and the Bank of England are currently recording the lowest level of mortgage arrears in 15 years. However, they warn that this could be a sign that people are not coming forward to seek help and risk deepening their debt or struggling without necessities.

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