A recent survey by YouGov for StepChange Debt Charity found that nearly 25% of UK mortgage holders have used additional credit forms in the last three months to maintain their borrowing commitments.
This increase in borrowing coincides with the Bank of England’s decision to hold interest rates at 5.25% for the sixth consecutive time, while UK Finance reports a rise in mortgage arrears.
The data also shows that 16% of mortgage holders have resorted to using their credit cards to manage other bills in the past three months, a rate higher than those in other housing situations. According to StepChange, such borrowing behaviours are indicative of potential financial difficulties.
Amid these challenges, the Financial Conduct Authority is due to review the Mortgage Charter by the end of June. StepChange argues that the need for the additional support offered by the charter remains critical, especially as average new fixed mortgage rates are approaching 6%, almost doubling the rates of expiring deals.
Furthermore, UK Finance revealed that the number of homeowner mortgages in arrears of 2.5% or more of the outstanding balance has increased by 3% in the first quarter of 2024, a substantial rise year-on-year from 76,680 to 96,580.
This underscores the severe debt pressure many homeowners are facing, as higher bills and housing costs erode savings and overall financial stability.
For homeowners struggling to meet mortgage payments, early communication with lenders is crucial. They have a regulatory responsibility to offer assistance, and resources like StepChange provide valuable guidance to manage mortgage debts effectively.
Richard Lane, chief client officer at StepChange, highlighted the severity of the situation for homeowners at the end of their mortgage deals, saying: “Most of the people currently seeking our help are tenants, but homeowners facing payment shock at the end of expiring deals are often the clients facing the most sudden, acute cliff edges of unaffordable cost hikes.
“There are still hundreds of thousands of people set to face this kind of payment shock this year – the problem hasn’t yet gone away. So it’s crucial that government continues to do everything possible to reduce the risk of people losing their homes as a result of mortgage rate hikes.
“This includes potentially extending the life of the Mortgage Charter, that goes above and beyond the normal forbearance measures already expected of mortgage lenders. In the meantime, any homeowner struggling to keep on top of bills should know that help is available.
“Not only are mortgage lenders duty bound to try to help, but services like StepChange can help you look at your finances in the round, not just your mortgage, and advise on solutions to help you achieve an affordable and sustainable budget.”