The Financial Conduct Authority (FCA) has warned an extra 356,000 mortgage borrowers could face payment difficulties by the end of June 2024, in addition to those who are already behind on repayments. This is a redaction on estimates made in September which suggested that an additional 570,000 homeowners could become financially stretched by the start of next summer.
The FCA defines mortgage borrowers as being financially stretched if more than 30 per cent of their gross household income is going towards mortgage payments and they are not currently in a payment shortfall. The new, lower estimate is due to changes in market expectations of the Bank of England base rate.
The FCA said that those rolling off a fixed-rate deal could end up paying an additional £340 a month on average. The regulator released the latest estimate as it confirmed finalised guidance, setting out the ways that mortgage lenders can help customers worried about or already struggling with their mortgage payments because of the rising cost of living.
The regulator expects firms to support people in financial difficulty and the guidance covers options such as extending the term of their mortgage or making reduced monthly payments for a temporary period.
Making changes, even temporary ones, may result in higher monthly payments in future or paying back more overall. Mortgage borrowers should consider carefully any steps they take and customers who can keep up with their payments should continue to do so, the FCA said.
Responding to the announcement, Martin Lewis likened the news to “a thin sandwich”', but said he is hopeful the measures put lenders in a position to be able to offer quick-fire support in the event of future interest rate shocks.
The founder of MoneySavingExpert.com, said: "This FCA initiative is a thin sandwich - lots of bread but not much meat. It is primarily about clarifying guidance, which is needed, rather than any new measures.
"It was born out of last December's mortgage summit, called by the Chancellor Jeremy Hunt, on the back of warnings of a potential ticking time bomb of both unaffordable high rates coupled with remortgage rejections due to the cost of living squeeze.
"As the only person invited not from a bank or regulator, I raised a number of tweaks, changes and improved communication as relief measures to get customers over a tricky time. Few of those have materialised. Some of that is for good reason. The worst case scenarios back then were dreadful, and the key to the meeting was being prepared for the worst.
"Thankfully, mortgage rates and interest rates haven't risen as high as they could have, so the need for urgent measures is less profound. Most who could afford to pay their mortgage then still can, even if it's tight. Yet it's also because getting any innovation through a body of lenders and regulators is tough.”
He added: "My hope is, as work has been done in the background, this carries on so there's a nimbleness and an ability to act in the event mortgage rates were to rise further."
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."
The FCA's research indicated that borrowers aged 18 to 34 are more likely to be financially stretched than the rest of the working age population.
Being stretched does not necessarily mean borrowers will miss payments as some will be able to use savings, reduce spending or increase incomes to help meet their mortgage commitments.
As well as contacting their lender for support, worried borrowers can also visit MoneyHelper for money tips, budgeting tools and to find free debt help.
The FCA said it will continue to monitor the mortgage market and how firms are supporting their customers.
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