Mortgage warning: Thousands are at risk of mortgage defaults as interest rates rise | Personal Finance | Finance
Amid soaring living costs, compounded by increasing mortgage interest rates, many homeowners may be starting to worry about the implications this might have on repayments. In a letter sent to the Treasury Select Committee, the Financial Conduct Authority (FCA) said that more than 200,000 households had already fallen behind on payments by the end of June 2022, with bills overdue on around one in 40 home loans.
In addition, the FCA estimated a further 570,000 mortgage borrowers could be at risk of payment shortfall in the next two years.
The FCA defined the shortfall risk as households who have to pay more than 30 percent of their gross income towards mortgage payments.
Kellie Steed, mortgage expert at Money.co.uk, said: “Many people will, understandably, be concerned about the FCA’s warning about the impact of rising mortgage costs, following a number of increases to the Bank of England Base Rate over the past year.
“Many of those looking to remortgage from a two-year fixed-rate in particular, will have taken out their mortgage when rates were at an all-time low, meaning the increase to their monthly repayments will likely be substantial.
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Speak to a mortgage broker
Quick rate changes and unusual pricing trends, such as longer-term fixed rates in some cases being cheaper than shorter-term fixes, means that the mortgage market can be tricky to navigate right now.
Ms Steed suggested: “If you’ve not yet switched to a new deal yet, expert advice will be more valuable than ever in the current market, especially if you’re approaching your first remortgage.”
Speak to your mortgage lender
For those who have or are due to remortgage and are currently struggling with higher repayments or are soon to begin to, Ms Steed suggested people inform their mortgage lender at the earliest possible time.
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Keep making payments
For those who have reached the point where mortgage repayments have become unaffordable, even after streamlining outgoings and making cuts in other areas, Ms Steed suggested continuing to make any payments that can be afforded against the mortgage whilst trying to resolve the issue.
Ms Steed said: “As well as showing the lender that you’re doing all that you can, this will help curtail the unpaid amount you’ll need to clear to get back on track with your mortgage, as well as potentially minimise late payments charges and damage to your credit report.”
There are a number of charities people can contact for further advice on how to manage their debts, such as Citizens Advice, StepChange, the National Debtline and Shelter.