Over 700 homeowners a day at risk of missing mortgage payment

A daytime view of houses on a street in North London, UK
People who have fixed rate mortgages which are coming to an end are likely to find that the repayments on their new mortgage will be a lot higher. Photo: Getty

There are 356,000 homeowners at risk of missing their mortgage payments, and this on top of those who are already behind, the financial regulator has warned.

The Financial Conduct Authority (FCA) said that borrowers aged 18-34 are more likely to be financially stretched than the rest of the working age population. Those living in London and the South East are most likely to be struggling.

The regulator said that, in addition to the 200,000 mortgage borrowers who were behind on payments as of June 2022, a further 356,000 mortgage borrowers could face payment difficulties by the end of June 2024.

This figure has been revised downwards from the FCA previous estimate in September last year due to changes in market expectations of the Bank of England base rate. At that point the FCA was predicting a jump of 570,000 borrowers.

Some of the borrowers who are hardest hit are those who are rolling off a fixed rate deal, on average those borrowers will end up paying an additional £340 a month because of interest rate rises.

“Our research shows most people are keeping up with mortgage repayments, but some may face difficulties,” Sheldon Mills, executive director of Consumers and Competition at the FCA, said.

Read more: UK mortgages: Average home owner will be 'well into their 70s' before loan is repaid

“If you’re struggling to pay your mortgage, or are worried you might, you don’t need to manage alone. Your lender has a range of tools available to help. Get in touch as soon as you have concerns, don’t wait until you are about to miss a payment before doing so. Just talking to them about your options won’t affect your credit rating,” he added.

The FCA is now taking action to protect homeowners, as it said it expects firms to support borrowers in financial difficulty.

The watchdog has finalised guidance confirming how mortgage lenders can support customers who have missed payments or are worried they may not be able to make payments in future.

It ranges from options such as extending the term of their mortgage to making reduced monthly payments for a temporary period.

“The outlook for homeowners is bleak, but not as bleak as it was. On top of the people who have already missed a mortgage payment, the regulator thinks another 356,000 homeowners are at risk of falling behind by the end of June 2024. This means more than 700 homeowners a day are at risk of missing a mortgage payment and falling into arrears,” Laura Suter, head of personal finance at AJ Bell, said.

“There is no hiding from the fact that the mortgage market is a terrifying place for the 1.4 million homeowners coming off a cheap fixed-rate deal onto far higher rates this year. While average mortgage rates have dropped since the aftermath of the disastrous mini-Budget last year, they are still significantly higher than the rates many homeowners are on. As these figures lay bare, for many homeowners the increase in costs will make their mortgage unaffordable, particularly in light of rising costs almost everywhere else in their spending,” she added.

Read more: UK average house prices fall by £8,500 from August peak

The FCA previously found that 47% of borrowers in financial difficulty mistakenly believed that simply contacting lenders about the support available would have an impact on their credit file. If borrowers agree an option with their lender to pay less than the agreed amount in their contract, this will be reflected on their credit file. But just talking to their lender won't affect their credit file and nor will some forms of support.

“Anyone struggling with repayments shouldn’t bury their head in the sand. Instead they should approach their lender to at least find out their options and weigh up which might work best for them. If they want an independent opinion they could speak to a charity like Citizens Advice to get more advice,” Sutter added.

Lenders proactively contacted customers a combined total of 16.5 million times, across a range of channels, to offer support in the last year. Following conversations with the FCA lenders have confirmed they expect to increase this to 20.5 million contacts over the next year.

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