What to do if you're facing a remortgage nightmare
If your mortgage deal is coming to an end, you may well be facing a remortgage nightmare.
Figures released on Thursday by the Financial Conduct Authority (FCA) found that on average someone coming off a fixed rate could pay £340 a month more on their new deal, which is an impossible sum to dig out from behind the sofa cushions.
It calculated that as a result, 356,000 more mortgage borrowers could face payment difficulties by the end of June 2024.
It reflects the Hargreaves Lansdown Savings & Resilience Barometer findings that showed remortgaging issues added to existing payment problems will mean that by the end of the year 26% of mortgage payers will be "at risk" of default — which is over 2 million people.
When you dig further, and look at the overall finances of people in this position, the results are even more worrying. Around 650,000 are at "high risk" because they are not only facing a dangerous hike in their mortgage payments, but they don’t have emergency savings to protect themselves.
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Meanwhile 347,000 are at "critical risk" because, on top of the extra costs and savings shortfalls, they’re already spending more cash each month than they have coming in.
The FCA warned that Londoners and people in the South East were particularly at risk, with around a third of people in both areas who remortgage this year at risk of falling into arrears.
This is due to the fact that house prices are so high in this part of the country that many buyers are shouldering enormous mortgages.
It also found that singletons were three times more likely to be at high risk and more than five times as likely to be in critical risk of arrears than couples. When you’re paying a mortgage on your own it can be even harder to find the extra cash to make higher repayments.
Age was also a factor — with people at both ends of the spectrum hit hard by rising rates. Younger people tend to be in smaller properties, but have bigger mortgages and higher monthly payments. It means that despite making up 46% of the market, Millennials and Gen Z will make up 61% of the increase in those at risk of arrears.
Baby boomers, meanwhile, are far less likely to have a mortgage, but those who do are in more trouble.
This group may include those who were forced to buy later in life — possibly after divorce. They may also have scaled back work, so it’ll be harder to pay higher bills. The research found that they’re one and a half times as likely to be at high risk and twice as likely to be at critical risk.
If you’re facing a remortgage, and the new payments are going to cause serious problems it can feel like you have no options left. If you’ve cut your spending in every way you can think of, and you still can’t cope with the new payments, your mortgage lender may be able to help.
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If they try to contact you, don’t assume they’re just chasing the money you owe them — they will also try to help.
The FCA has laid out guidance for how lenders should support those who are struggling, including options like extending the mortgage term or cutting monthly payments for a while.
The sooner you make contact the better, ideally before you’ve missed a payment. They can take you through the options and you may well be able to find a more manageable solution. It’s far better than letting your problems build — and it's better for your credit record too.
If the thought of talking to your lender fills you with dread, you don’t have to manage on your own. Debt charities like StepChange can offer some excellent support though the process.
Nobody can solve this issue at a stroke for you, but once you understand your position, and all the options open to you, there’s less chance that your mortgage nightmares will keep you up at night.
Sarah Coles is a personal finance analyst at Hargreaves Lansdown and co-presents Switch Your Money On podcast.
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