Some 7 million UK households are grappling with rent or mortgage payments, with millions more at risk of falling into financial difficulty by the end of 2024 as they face higher rates when remortgaging, according to consumer group Which?.
Nearly half of households (46%) which rent or have mortgages are finding it tough to meet their housing payments, a survey of 4,000 Brits found.
Despite the Bank of England maintaining interest rates at 5.25% last week, mortgage repayment stress is still to come for just under a third of homeowners. Some 2.1 million households will see their fixed-rate deals finish by the end of 2024.
Another 4.5 million households have already seen monthly payments soar.
It is not just those on the lowest incomes who are being affected by the interest rate rises, Which? said.
"Our mortgage is due to renew later in [the] year and sounds like there will be further increase in interest rates," said a respondent from Northern England, worried how his household can afford to cover bills on an income of £55,000 to £79,999.
Interest rates guide what banks charge customers to borrow money and rises have wrought havoc in the housing market this year as customers grapple with increased mortgage payments.
Rocio Concha, Which? director of policy and advocacy, said: "We’d encourage anyone who’s struggling to seek free debt advice and reach out to their mortgage provider or landlord for help."
Renters are also likely to be affected by interest rate rises as landlords whose mortgage repayments have gone up may raise rents to cover the increase.
“I worry about the roof over my head and the fact my rent is about to increase because I cannot afford to pay the increase," said a respondent from South England on an income of £10,000 to £14,999.
Many households across the country have had to tap into their savings, affecting their ability to handle emergencies and capitalise on higher savings rates.
The government's Renters (Reform) Bill, was introduced in May as part of a range of measures to regulate the UK rental sector. This included the abolition of Section 21 ‘no fault’ evictions, providing more security for tenants and empowering them to challenge poor practice and unfair rent increases without fear of eviction.
Nearly half (45%) of mortgage holders are closely monitoring their finances and budgeting more, while one in five (21%) are working longer hours to cover housing expenses.
The strain of housing payments is also taking a toll on emotional wellbeing. Which? found that over half of renters and those with mortgages report daily stress, compared to just three in 10 outright homeowners.
A majority of mortgage holders and renters are worried about their household's financial security and feel a lack of control over their finances.
Which? is urging banks and mortgage lenders to prepare for an influx of customers seeking support. This includes adequate staffing customer service support channels like phone calls, email, and chat support.
The Financial Conduct Authority's new Consumer Duty, which came into force in July, is meant to improve customer service standards so that customers receive support aligned with their financial needs. Companies that fall short of these standards can expect stringent action from regulators.
“Banks and mortgage lenders must ensure they are fully staffed and properly prepared to properly support customers getting in touch to remortgage or because they are struggling to make ends meet," said Rocha.
Individuals concerned about mortgage repayments should reach out to their lender, as this won't impact their credit score, Which? advises.
Lenders can offer support options tailored to individual circumstances, such as temporary mortgage holidays or extending the mortgage term.
A temporary mortgage payment holiday: Repayments are paused for a set period of time — but interest will continue being added to a loan with a likelihood of paying additional interest.
A temporary switch to interest-only payments: This is a payment on the interest of a mortgage, without repaying the loan itself, for temporary period of time — which could mean that the entire mortgage is paid later than planned.
Extending the mortgage term to reduce monthly payments: you can stretch out your mortgage term, from 30 years to 35 years, for example. You'll be paying back the same amount of debt, but over a longer period as your monthly bill will be reduced.
Which? encourages renters to discuss their situation with landlords. Specialist housing charities such as Shelter offer free support.
People at risk of becoming homeless due to eviction should contact their local council's housing department for advice on emergency accommodation.