- 42% are concerned about potentially not being able to afford their mortgage and will make cuts to non-essential spending
- 18% said they will not be able to afford their repayments after they remortgage
- Survey outlined cutbacks on spending at restaurants, salons, clothing and for travel
- Only 14% stated there would be no change to their spending habits after remortgaging
Rising mortgage interest rates are a major concern for many homeowners across the country, with 4 in 10 (42%) planning to cut back on non-essential spending in order to meet their repayments, according to research conducted by financial comparison site Money Expert.
The study was conducted to find out more about the thoughts and concerns of UK households, following the sharp increase in interest rates that has directly affected mortgage repayments. ONS data suggested that over 1.4 million UK households will face the prospect of higher interest rates when their fixed-rate mortgages come to an end this year, alongside the impact of the ongoing cost of living crisis.
Of the 1000 people who took part in the study, over two thirds (63%) stated they will need to remortgage their home within the next 12 months, with over a third (37%) saying they’d signed up to a new mortgage within the last six months.
The data also showed that mortgage repayments for 18% of homeowners have become unaffordable due to the rise in rates offered by lenders. Only 13% of respondents said they were not concerned about the increases in their mortgage repayments.
Spending cutbacks
Homeowners have suggested that they will make monthly cuts to non-essential spending just to meet their rising monthly mortgage repayments.
When asking mortgage borrowers what they’re most likely to spend less on, visiting restaurants topped the list, with over half (52%) suggesting they would cut back on dining out in order to pay their mortgage.
Brits have traditionally loved to travel and spend money on holidays at home or abroad, with the average cost of a single trip coming in at £857 in 2022. However, the survey revealed that 46% of households would be cutting their spending on travel, in order to meet their monthly repayments thanks to rising mortgage costs.
Spending on clothing will also take a hit, with 42% of homeowners suggesting they would look to save money by reducing costs on non-essential clothes and footwear. Personal grooming and wellbeing spending is also likely to reduce in the coming months, with over a third of respondents (35%) saying they’d cut back on visits to salons and beauty treatments.
Apart from a mortgage, one of the biggest expenses for many people is likely to be their car. It’s no surprise then that some households won’t be spending their disposable income on a new car for the time being, with 28% saying they would delay purchasing a new vehicle due to the rising mortgage repayments.
Household disposable income
The survey asked how much disposable income households had to spend once all bills and expenses were settled, prior to and post remortgaging their homes.
The most common amount (29% of respondants) of disposable income households had to spend before remortgaging their home was between £300 and £500 per month. Conversely the most common amount (27% of respondants) of disposable income households had to spend after remortgaging their home, or likely to have, was between £100 and £300. This shows the real world drop in the spending power of UK households due to the rise in interest rates.
Providing analysis of the results, Paul Ford, Group Commercial Director at Fluent Money said, “Rising mortgage interest rates are undeniably a source of significant concern for homeowners across the UK. The fact that 42% of households are planning to cut back on non-essential spending to meet their mortgage repayments highlights the real financial strain many are facing. Homeowners must now be more proactive than ever.”
“At Fluent, we believe in starting conversations with our customers as early as possible, ideally months before their current mortgage deal ends. An early approach allows us to work together to find tailored solutions and ensure customers are well-prepared to face the future with confidence. We find that taking this proactive approach and staying ahead of the curve, helps our customers navigate this challenging financial landscape effectively.”
Further commenting on the results, Liz Hunter, Commercial Director at Money Expert said, “Many UK homeowners are having a tough time financially, with issues relating to the cost of living alongside rising costs in energy bills that continue to put a squeeze on household spending.”
“Rising mortgage rates will be a major concern for many people, particularly those who are coming up to the end of their agreement within the next six months, with good mortgage deals now few and far between. The Bank of England has raised the base rate 14 times in a row and is currently set at 5.25%, with predictions it could rise further to 5.5% in September. Given this predicament, it’s unlikely we’ll start to see lower interest rates for a while yet, and very unlikely they will return to the ultra low levels experienced post the 2008 financial crash.”
“If your mortgage is coming to an end soon, there are a number of things you can do right now to prepare to ensure you get the best price possible in today’s turbulent financial market:
Do something rather than nothing – If you do nothing, you’ll be moved onto your lender’s standard variable rate, which is almost always considerably higher than some of the fixed-rate deals currently available.
Review your budget – Spending a few hours reviewing your monthly income and outgoings will give you a better idea of what you can afford and where you might be able to cut back and save.
Plan ahead – Don’t wait until your current deal comes to an end – most lenders allow you to secure a deal up to six months in advance. It’s best to start sooner rather than later, as rushing to secure a deal could leave you worse off.
Talk to your current lender – It’s worth seeing what your current lender can offer you. This often makes the remortgaging process quicker and easier, as you won’t need to provide as much paperwork. It may also mean you incur fewer fees.
Compare deals – Don’t agree to a deal with your current lender until you’ve shopped around. Use a comparison website to compare the fixed rate lengths, monthly costs, total costs and fees of different mortgage deals via alternative lenders.
Seek help from an independent mortgage broker – Once you’ve benchmarked the rates available, it’s worth seeking professional advice. A mortgage broker will assess all of your options, advise you on which is most suitable and support you throughout the application process.”
