How 750,000 families risk falling behind on mortgages

MORE than 750,000 homeowners are at risk of defaulting on their mortgage payments in the next two years, the City watchdog has warned.

The Financial Conduct Authority said 200,000 mortgage-holders had fallen behind on their home loans by June 2022. The regulator estimates a further 570,000 borrowers are at risk of being unable to meet their mortgage payments between now and the end of 2024, amid rising costs.

A household is at risk of a shortfall if their mortgage payments make up more than 30 per cent of their monthly household budget. The forecast is based on the assumption that households will face a 10 per cent fall in their incomes during the next two years as wages fail to keep pace with inflation.

Soaring food, fuel and energy costs have already put pressure on household finances, with inflation now more than double where it was last year.

Last week, the Office for National Statistics said that 1.4million households face higher interest payments next year as their fixed rate mortgages expire.

About 800,000 households could see their mortgage rates double, the ONS warned.

Around 57 per cent of mortgages coming up for renewal this year were fixed at interest rates below 2 per cent. The average two year fixed-rate mortgage is now 5.79 per cent after peaking at 6.65 per cent in October. Five-year fixes have also fallen to 5.63 per cent after peaking at 6.51 per cent in the same month.

However, the rate rises are unlikely to result in a wave of repossessions similar to those seen during the credit crunch, when 115 homes were reclaimed every day, according to one expert.