This has been confirmed by the Financial Conduct Authority (FCA) which has been keeping an eye on the market since the rising cost of living began to impact consumers’ finances.
The regulator sent lenders a ‘Dear CEO’ letter in June reminding lenders to provide tailored forbearance and be aware of the impact of rising costs on mental and physical health.
Data published by the FCA today shows that in addition to the households which are already behind on payments, 356,000 mortgage borrowers could face payment difficulties by the end of June 2024.
However, this is down on the estimation the regulator made in September 2022 when it projected that 570,000 borrowers would struggle. The regulator said this was down to changes in market expectations towards the Bank of England base rate.
At the time the base rate was predicted to peak at 5.5 per cent but the expectation has since been lowered to 4.5 per cent.
The FCA said people coming off a fixed rate deal could end up paying £340 more a month towards their mortgage bills on average.
The research found that borrowers aged between 18 and 34 were most likely to be financially strained, as were people in London and the South East. However, the FCA noted that this did not mean they were more likely to miss payments, just that they would rely on savings, reduce spending or increase their income.
Suggested support
The regulator said lenders could support borrowers who have missed payments or are concerned about making payments in the future by considering options such as extending the term of their mortgages or temporarily reducing their monthly payments.
The FCA said even short-term changes could result in people being able to make higher payments in the future or pay back more overall.
The regulator, major lenders and consumer representatives attended a mortgage summit hosted by the Chancellor Jeremy Hunt in December. Since then, the FCA has continued to work with lenders to make sure borrowers get the support they need, including timely communication.
The FCA said since meeting with lenders and consumer representatives at a mortgage summit hosted by Hunt in December, it had worked with lenders to ensure they contacted borrowers in a timely manner to offer support.
Lenders have contacted borrowers 16.5 million times in total over the last year and this is expected to increase to 20.5 million contacts over the next year.
Some two million borrowers were supported to manage their finances.
The FCA is also working with the Money and Pensions Service, consumer groups and lenders to make consumers aware of the help available.
The regulator said it would continue to monitor the market closely.
It also reminded borrowers that they could use other services for help such as the Moneyhelper website. It noted that some forms of support or speaking with a lender would not impact a borrower’s credit file.
Sheldon Mills, executive director of consumers and competition at the FCA, said: “Our research shows most people are keeping up with mortgage repayments, but some may face difficulties.
“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’re about to miss a payment before doing so. Just talking to them about your options won’t affect your credit rating.”
