Strain Felt By London Homeowners as 1/3 Face Mortgage Struggles

by | Monday 21st Aug 2023 | Mortgage News

London homeowners are facing a mounting financial challenge as new analysis by City Hall reveals that a significant portion, one third to be exact, feel that they are at risk of struggling to meet their mortgage payments over the next six months. This distressing statistic emerges from a recent YouGov poll, ordered by City Hall, that indicates that 34% of mortgaged homeowners in London anticipate difficulty in making their mortgage payments, a notable increase from the 21% recorded earlier this year.

The Financial Crisis Is Hitting London Homeowners

What does this mean exactly? Does it mean that 34% of homeowners will definitely struggle to make their mortgage payments? No. But it does mean that borrowers are starting to feel the strain of the mortgage rate increases and there is a serious worry among borrowers. A worry that can only be helped with the right guidance from a mortgage professional. Mayor of London, Sadiq Khan, reacting to the new poll data has issued a stark warning about the growing number of homeowners pushed to the brink of financial devastation due to these intertwined challenges. Approximately 209,000 London households are expected to bear the brunt of rising mortgage costs, resulting in an additional average monthly expense of £520.

Drawing data from the Financial Conduct Authority, City Hall/YouGov’s research shows the scale of the mortgage crisis gripping London. A staggering 384,000 London households have already been adversely affected by rising mortgage rates, a result of the Government’s mini-budget introduced last year. This figure includes those who have variable rate mortgages or have transitioned from fixed rates since October 2022.

Could There Be a ‘Mortgage Bomb’?

The City Hall report goes on to discuss an analysis by the Institute for Fiscal Studies, which indicated that London households are grappling with an extra cost of around £520 per month. The cumulative effect of these incremental expenses has been dubbed a ‘mortgage bomb,’ resulting in a substantial collective financial strain estimated at around £2.4 billion annually.

The urgency of the situation has prompted Sadiq Khan to advocate for swift government intervention and to suggest several remedies to ease the mortgage stress. His call for action includes reinstating mortgage payment holidays, reversing cuts to mortgage interest support through the benefits system, and facilitating the transition of owners in dire straits to more affordable housing options such as interest only loans or longer mortgage terms. The Mayor highlights the disproportionate impact of high mortgage rates on lower-income households. Meaning that the lower-income households are going to feel the impact of higher interest rates much more than higher-income households. Warning that without intervention, many families could be at risk of defaulting on their payments, falling into debt, or even losing their homes entirely.

Sadiq Khan said, “The Government have so far failed to recognise the scale of the crisis – I’m calling on Ministers to take urgent steps to protect London’s homeowners from the devastating impacts of high mortgage rates.”

Are Rates Coming Down? And What Can I Do To Avoid Mortgage Struggles?

Despite some recent reductions in mortgage rates by certain lenders in recent days, the pressure on homeowners remains an ongoing concern throughout the city. Many of the big high-street banks and building societies have started to drop rates from highs of almost 8% a few months ago, giving a positive outlook for the coming months. We do expect rates to drop even further sooner rather than later, but we do still have perhaps another 12 months or fairly high rates.

As Londoners face the daunting prospect of a potential ‘mortgage bomb,’ the need for immediate action to alleviate mortgage stress is more clear than ever. As brokers, unfortunately we can’t force lenders to drop their rates. But what we can do is research the market for you and help you to get the most competitive and manageable rate, product and deal for your circumstances. Call or email our team today to speak directly with a mortgage broker. We are here to help.

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