More than 43% of mortgage holders lack a plan to manage potential increases in their monthly payments when their fixed-rate deals expire, according to research by longer-term lender April Mortgages.
The survey revealed that nearly 30% of fixed-rate mortgage holders would struggle to absorb a monthly increase of up to £200, while a rise of up to £300 could create financial difficulties for nearly half (47%).
The Bank of England has projected that by 2027, half of UK mortgage holders could see their payments rise, with an average increase of around £146. Alarmingly, over 400,000 homeowners could face hikes of £500 or more each month.
Despite these looming challenges, seven in ten mortgage holders (70%) report concerns about rising payments when their current deals end. However, only 59% anticipated these increases when they initially secured their mortgages.
Homeowners aged 35 to 44 expressed the highest level of concern (77%) about repayment hikes. However, those aged over 55 are most vulnerable, as they are less able to accommodate increases. While a typical rise of £390 would strain the average mortgage holder, over-55s report an affordability threshold of just £362. By contrast, younger homeowners aged 25-34 could endure increases up to £451.
Two fifths (42%) of homeowners say they would have to cut back on non-essential spending to cope with any increase in their mortgage, while more than a quarter (27%) would need to limit spending on essential items such as food and utilities[4].
Only 27% of mortgage holders expect their income to cover any increase, with a further 27% likely to use savings to cover the shortfall and 21% taking on additional work or a second job. One in ten (9%) respondents would borrow money from family or friends and six per cent would take out a personal loan[4].
Rachael Hunnisett, director, longer-term fixed rate lender April Mortgages, comments:
“Millions of mortgage holders are being squeezed to their limits as fixed-rate deals end and monthly repayments soar. Homeowners are caught in the crunch, with many facing higher monthly mortgage costs.
“The truth is, borrowers have better things to do than stress about their mortgage payments and the constant hassle and cost of remortgaging every couple of years.
“ A short-term deal might look tempting, but why leave yourself wide open to payment shocks and financial headaches down the line when you could choose certainty and security.
“Locking into a modern flexible five, 10, or even 15-year fix isn’t just about protecting yourself from future rate hikes – it’s about peace of mind.”
