The number of households struggling to pay their rent or mortgage is increasing due to the cost of living crisis, according to the Office for National Statistics (ONS).
Researchers found that the proportion of adults finding it ‘somewhat’ or ‘very’ difficult to afford their energy bills, rent or mortgage payments has increased through the year.
Just under a third (30%) of those questioned about the period June to September 2022 said their rent or mortgage was difficult to afford. This compares to 26% who said the same thing regarding the period March to June 2022.
About four in 10 (39%) tenants found it difficult to afford their rent payments, while 23% of homeowners struggled to pay their mortgage.
The mortgage market has seen several weeks of mayhem since Kwasi Kwarteng’s mini-budget, with the majority of mortgage lenders raising their rates. Meanwhile rent prices have been rising across the UK, due to a lack of supply of rented properties.
Rio Stedford, financial planning expert at Quilter, said: “Interest rates have been rising to try and combat rampant inflation. But due to fuel being thrown on the fire during the mini budget, interest rates are projected to rise even further later this year. Lenders have been quick to up their mortgage interest rates on all products, which mean that homeowners with fixed rates coming to an end within the next year or two, will likely see their bills rise considerably when they come to the end of their deal.
“The option of moving to a smaller home to achieve lower monthly mortgage payments is starting to become a real consideration for some homeowners. However, before putting a house on the market, it is worth considering that if a flood of properties all hit the market at the same time, this could end up driving house prices down.”
What to do if you are struggling with your mortgage payments
Don’t bury your head in the sand
Lenders will normally write to you within 15 days of a missed payment but if you are struggling to pay, it is crucial that you talk to your lender before they contact you.
Burying your head in the sand will only make things worse. Mortgage debt is a ‘priority debt’ and should be prioritised above most other types of debt you have.
Work out what you can afford to pay
Before picking up the phone to your lender, take some time to work out exactly how much you can afford to pay each month. There are budgeting tools available online or you could speak to a debt charity or Citizens Advice.
If you have sought help, let your lender know as showing that you have looked at ways of paying back your debt shows you’re serious about it. This can help avoid repossession orders down the line.
Discuss ways of making payments
Lenders have a duty to act fairly with customers who are having difficulties. Having a frank conversation with your lender can help it find a way for you to avoid the problem spiralling out of control.
Your lender might be able to put you on a payment plan based on what you can afford to pay back. You might be able to extend your mortgage term, or if your home is worth more than the mortgage, you might be given the option of adding your arrears to the total amount you owe and paying it back over the lifetime of the mortgage.
