Categories: Economy

One in four mortgage holders can’t afford monthly payments if they raise £100, Citizens Advice says

One in four mortgagees won’t be able to afford $100 in monthly payments and nearly half will struggle if they raise $250, Citizens Advice says

  • Citizens Advice research points to risk if rates continue to rise
  • One in 7 mortgage holders has already cut back on essentials to save money
  • Mortgage rates have skyrocketed in the wake of ill-fated mini-Budget
  • Borrowers who come to the end of fixed deals face a severe mortgage shock



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More than a quarter of mortgage holders would not be able to pay their monthly repayments if they increased by £100 a month, according to new research from Citizens Advice.

Nearly half (45 percent) would be unable to make their payments if they increase by £250 a month, the organization said.

In September, 49 percent of Citizens Advice debt advice mortgage holders said they had more money coming out of their finances than coming in each month.

Counting the costs: With rising mortgage rates, 1 in 7 borrowers has cut back on essentials to make ends meet, according to Citizens Advice

Citizens Advice estimated that this was true for about 11 percent of all mortgage holders in the UK.

The stark findings highlight the risk surrounding rising mortgage rates. After sharp increases in the past month, average rates remain above 6 percent.

On Sept. 23 (mini-budget day), the average two-year mortgage rate 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 size would add £134 to the monthly payments for a £200,000 mortgage over 25 years, or an additional £1,608 per year.

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

Experts warn of a looming mortgage crisis as borrowers who set their rates two or more years ago have struck much cheaper deals and will see their spending rise.

Last year, Nationwide launched a product at a rate of just 0.87 percent, with a 40 percent down payment.

At the time, TSB had an even more advantageous offer of 0.84 percent for refinancing.

Share price higher: Mortgage rates have risen sharply in recent months as rising costs of borrowing have pushed up prices for homeowners

The problem is exacerbated by the cost of living crisis, which is partly caused by inflation.

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

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One in seven mortgage holders has already cut back on essentials, while one in ten has taken out expensive loans to make ends meet, according to Citizens Advice polls.

For mortgage holders with negative budgets and already unable to pay off their loans, the figures add up to one in four austerity measures and nearly one in five are taking advantage of high fees.

Citizens Advice data paints a grim picture of a looming mortgage crisis if borrowers fail to pay their monthly bills.

In a blog post accompanying the data, Citizens Advice’s chief 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 out on mortgage payments and go into arrears. They can cut back on essential expenses for things like food and energy. Or they can start using credit to fill the gap and go deeper into debt.

Mortgage lenders should think about how they can help people in financial difficulties through measures such as restructuring payments, deferring payments and eliminating additional fees and charges

“Of these three, it is the first where people are best protected. Mortgage lenders need to think about how they can help people in financial difficulties through measures such as restructuring payments, deferring payments and eliminating additional fees and charges.

“But the concern is that people aren’t getting this support and instead are running out of essentials or getting deeper into debt.”

According to Costa and Beddow, the FCA and the Bank of England currently have 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 ask for help and risk deepening their debts or struggling without essentials.

You can contact Citizen 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 deal is expiring, or because they have agreed to a home purchase, have been urged to act, but not to panic.

Banks and mortgage banks are still lending and mortgages are still being offered and applications are being accepted.

However, rates change quickly and there is no guarantee that deals will last and not be replaced by higher rate mortgages.

This is Money’s best mortgage interest calculator powered by L&C that can show you deals that match your mortgage and property value

What if I have to transfer?

Borrowers should compare rates and speak to a mortgage broker and be willing to trade to get a rate.

Anyone with a fixed-rate deal that expires in the next six to nine months should research how much it would cost to re-mortgage now — and consider taking on a new deal.

With most mortgage agreements, costs can be added to the loan and they are not charged until it is closed. By doing this, borrowers can secure a rate without paying expensive arrangement fees.

What if I buy a house?

Those with a home purchase should also aim to get rates as soon as possible so that they know exactly what their monthly payments will be.

Home buyers need to be careful not to overburden themselves and be prepared for the possibility that house prices could fall from their current high levels as higher mortgage rates limit people’s borrowing capacity.

Compare mortgage costs?

The best way to compare mortgage costs and find the right deal for you is to talk to a good real estate agent.

You can use our best mortgage interest calculator to display deals that fit your home value, mortgage size, term and fixed interest needs.

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

> Check out the best fixed rate mortgages you can apply for


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