According to the Financial Conduct Authority, rising mortgage rates are placing young homeowners under greater financial pressure (FCA).
The FCA estimated that by July 2021, 356,000 individuals could be struggling to make their mortgage payments, with those aged 18 to 34 being the most affected. This number is lower than the 570,000 estimated for September 2020 due to the return of competition to the home loan market and the decrease in fixed interest rates.
Younger homeowners and those residing in London and the South East of England are most likely to find themselves in this situation, with an average monthly increase of £340.
Sheldon Mills, executive director of consumers and competition at the FCA, stated, “Our research indicates that the majority of individuals are able to keep up with their mortgage payments, but some may experience difficulty.” If you are having trouble paying your mortgage or are concerned that you will, you do not need to manage on your own. Your lender offers a variety of assistance tools. Do not wait until you are about to miss a payment before getting in touch if you have any concerns. Simply discussing your options with them will not affect your credit rating.”
In 2020, mortgage rates have increased, resulting in fixed-rate mortgages that are more expensive for many homeowners than they have been for at least a decade. This has been exacerbated by rising living expenses, particularly food and energy bills.
The FCA advises borrowers who are in arrears to request modifications to their existing repayment plans. This may involve lower payments for a limited time or an extension of the mortgage’s term. Alternately, lenders may suggest that borrowers take a “mortgage holiday” that allows them to delay payments; however, this must be done in accordance with the borrower’s specific circumstances and not for those who are already in arrears.
The FCA reminds borrowers that any change in payment plans or missed payments will be reflected on their credit file, thereby affecting their future ability to borrow money.
As mortgage interest rates continue to rise, young homeowners are experiencing increased financial strain. By July 2021, the Financial Conduct Authority (FCA) estimates that 356,000 individuals may be unable to make their loan repayments, particularly those aged 18 to 34 who are most affected by the changes. As a result of the return of competition to the mortgage market and the decline in fixed interest rates, the overall situation is not as dire as had been anticipated.
Sheldon Mills, executive director of consumers and competition at the FCA, stated, “Our research indicates that the majority of individuals are able to keep up with their mortgage payments, but some may experience difficulty.” If you are having trouble paying your mortgage or are concerned that you will, you do not need to manage on your own. Your lender offers a variety of assistance tools. Do not wait until you are about to miss a payment before getting in touch if you have any concerns. Simply discussing your options with them will not affect your credit rating.”
Due to the mini-budget, mortgage rates have increased throughout 2020, making fixed-rate deals more expensive for many homeowners than they have been for at least a decade. Increasing living expenses, particularly food and energy costs, have added to this strain. The FCA advises borrowers who are having difficulty making payments to contact their lender, as they may be able to negotiate alternative repayment plans, such as lower payments for a short period of time or extending the mortgage term. In addition, lenders may suggest a “mortgage holiday” that allows the borrower to delay payments; however, this must be done according to the borrower’s individual circumstances and not for those who are already in arrears. It is important to note that any changes to payment plans will be reflected on credit reports and may affect borrowers’ ability to borrow in the future.
With rising economic pressures on young homeowners, it is imperative that they contact their lenders if they are having trouble making payments so that a suitable solution can be developed.
