Millions of cash-strapped home owners struggling to pay their mortgage could be on the wrong deal.
According to L&C Mortgages, 1.4 million UK households have difficulty paying their mortgage, while 2.6 million people think their monthly payments are too high.
The worry about meeting monthly payments has resulted in 2.5 million home owners making significant cutbacks to reduce their spending in order to meet their monthly payments.
The news comes after the announcement that inflation has soared to a four-year high of 2.7%.
With inflation predicted to peak at just below 3% in December, cash-strapped consumers already having to cope with rising food and energy bills are likely to feel the strain even more.
David Hollingworth from L&C Mortgages 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.”
Remortgaging
The research revealed that over half of borrowers (58%) have never remortgaged for a better deal, potentially missing out on huge savings.
Most worryingly, four million households are still on a standard variable rate mortgage.
Not only are these rates typically higher, but if interest rates rise home owners could see their mortgage payments go up even more.
The research also highlights that 1.1 million households are wasting £2.78 billion by sitting on the wrong mortgage deal.
Hollingworth said that the problem is that while people feel they are struggling, they are not taking steps to manage their mortgage.
“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,” he said.
“It is really important that people keep on top of their mortgage and take control of their monthly payments by using the current low in mortgage rates to their advantage. It is always worth seeking advice to make sure you are on the best deal and see if there is anything that can be done to relieve the stress of managing high payments. Always ask – could I be on a better deal?”
Inflation
With rising inflation and wage growth starting to slow, consumers are beginning to feel a squeeze on their disposable income.
Following the EU referendum the value of sterling plummeted. This pushed up import costs, which in turn boosted consumer prices and caused inflation to increase.
Last week, Bank of England Governor Mark Carney said that 2017 would be a challenging year for consumers with rising inflation leading to a fall in real wages.
Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: “Higher inflation is contributing to buyers’ nervousness about prospects for the property market and making them more determined to achieve the best possible deals.
“There are concerns about affordability and possibly jobs being compromised mainly because changes in exchange rates are pushing prices up and making goods more expensive. It underlines once again the importance of realism from buyers and vendors, particularly the latter, if they want to transact.”
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