With most mortgage holders having switched to fixed-term contracts, higher mortgage rates will not impact all mortgage holders equally. Homeowners that are required to refinance their mortgages and those on variable-rate mortgages during this period face a sharp rise in mortgage cost compared to those who continue to be within their fixed term.
According to our forecast, by the end of 2023 mortgage costs will exceed 25% of net income for more than a quarter of mortgage owner occupiers. In common with FCA parlance, we define these households as ‘at risk’ of default and our analysis reveals that by the end of 2023, we expect there to be just over 2 million ‘at risk’ households, which would mark an 18-month increase of approximately 425,000.
For many of those refinancing, the financial shock will be unpleasant but manageable. By combining data from the Financial Barometer database the study incorporates information on other aspects of this ‘at risk’ group’s financial position. Focusing in on the vulnerable cohort, nearly one-third (650,000) have inadequate cash savings and around one-in-six (347,000) combine this with unsustainable spending.
About the team
Our Economic Consulting team are world leaders in quantitative economic analysis, working with clients around the globe and across sectors to build models, forecast markets and evaluate interventions using state-of-the art techniques. Lead consultants on this project were:
Director, Economic Consulting
Lead Econometrician, Economic Consulting
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