Nearly half a million people might not be able to pay their mortgage in the next six months, new information says. Troubles debt and people not being able to pay are seen to be worsening because mortgage interest rates have gone up steeply.
The Bank of England made interest rates higher many times between March 2022 and August 2023. Eligible, a smart system banks use to talk about money stuff, says that 670,000 people didn’t pay their mortgage in the last year.
More people are behind on their home payments than before. UK Finance says there’s been a 25 per cent jump to 93,680 people who owe money, the Express reports.
READ MORE: Octopus, British Gas and OVO customers could get an extra £308 in their bank accounts
Zahra Hassan, who helped start Eligible, said: “The fundamental problem is that mortgages are a financial product that customers take out only once every three to five years.” She also said: “This means that they aren’t regularly engaging with their mortgage and aren’t in the loop of what all their options are.”
Lots of people in Britain, about 5.4 million, say paying for their home is making them really worried about money. This is happening when the cost of living and energy bills are going up too.
Eligible thinks not talking enough is a big reason why people might soon have trouble paying for their homes. They found out that 1.3 million people don’t really get what their mortgage means because they don’t talk to the people who lent them the money.
Ms Hassan stated: “In a broader sense, rising interest rates, coupled with increased energy and living costs, heighten vulnerability to default. However, the key factor that pushes someone from financial strain to actual default is their lack of awareness about the array of options that their bank could have offered to temporarily ease their financial burden, particularly on their largest financial obligation their mortgage.”
According to Eligible, banks are increasingly being asked to provide tailored and proactive real-time communication with their customers, especially with the introduction of the FCA’s Consumer Duty on July 31, 2023. Setting a new standard for consumer protection in financial services, Consumer Duty requires providers of financial services to provide ‘good outcomes’, primarily driven through proactive communication from the service provider.
Eligible points out that advancements in technology such as machine learning programmes – can be used by financial institutions to identify customers at risk and generate personalised support adapted to their unique situation. Ms Hassan said: “What’s needed and what we’re doing at Eligible is an active two-way dialogue.”
More lenders have been increasing interest rates on mortgages over the past two to three weeks in a move that some experts have described as “undermining the sentiment in the property market”. Bob Singh, the founder of Chess Mortgages, told Newspage news agency: “Lenders raising rates has started to undermine sentiment in the property market. Prospective buyers are starting to batten down the hatches again.
“This trend looks set to continue until rates start to come down again. The market badly needs positive economic data to revive the confidence seen of late. The March Budget could provide the impetus the market needs to escape the roll call of bad economic news.”
Michelle Lawson, who is the Director at Lawson Financial, added: “The yo-yoing of mortgage rates is doing nobody any favours. January saw joy, February fluctuations and based on the current trajectory, madness will define the mortgage market in March.”
“The public don’t know whether they are coming or going. As brokers, the only thing we can say is do what is right for you for now. If your mortgage is due in the next six to eight months then start thinking now and get a good broker on board who can secure a rate now before they rise further and change the product if rates come down again before completion.”
“The mortgage market has gone from the sublime to the ridiculous in seven weeks.”
Sign up for our daily newsletter here for all the latest news about Coventry
