More than a million Britons are struggling to pay their mortgage and another 2.6 million think their monthly payments are too high claims a new report.
The report from mortgage advisor L&C Mortgages adds that over half of them (58%) have never re-mortgaged for a better deal and 2.5 million say they are being forced to make significant cutbacks in their monthly spending so they can meet their mortgage repayments.
Other financial data shows over a third of UK householders are still on a standard variable mortgage.
“Not only are these rates typically higher but if interest rates rise, the four million people who are on SVR mortgages could see their payments go up even more,” say the report.
Current average household debt over and above the mortgage is £10,048, comprising overdrafts, student loans and credit cards.
The figure increases to £12,992 when looking at the specific 18 to 34 age group.
‘Just about managing’
L&C Associate director, David Hollingworth, said: “The fact that people have been making cuts in order to cover mortgage payments indicates how people feel they are ‘just about managing’ in many aspects of their lives.
“We know that British households last year ran down their savings to a record low and that the cost of basics such as energy and the weekly shop are continuing to rise – so it’s no wonder that people are feeling the pressure when it comes to their monthly mortgage payments.
“The problem is although people feel they are struggling, they are not taking steps to manage their mortgage.”
L&C believes 1.1 million people are wasting £2.78 billion because they’re sticking with the wrong mortgage.
Said Mr Hollingworth: “Our research has found that millions are sitting on the wrong deal, even though seeking advice could potentially save consumers some hard-earned cash by getting a better deal, and even enable them to pay off their mortgage more quickly.”
Bank Of England figures show mortgage borrowing is at a record high relative to incomes, leading governor Mark Carney to comment that keeping current borrowing restrictions of 4.5 times salary in place is important to try to stop over-indebtedness.
He said: “They will help ensure that underwriting standards don’t slip from responsible to reckless as they have during past periods of consumption-led growth.”
There are two main factors behind the increase have been house prices rising faster than incomes and record low interest rates which make larger loans more affordable.
But the Bank Of England has warned borrowers to think ahead to the time when interest rates start to rise again and make sure they don’t end up in difficulty with their repayments once rates start to rise.