UK low-income households struggle as mortgage arrears climb
2023.11.17 01:22
A recent survey by Savanta has highlighted the growing financial strain on low-income UK households, with over half now falling behind on their mortgage payments. The Bank of England’s target rate, which has undergone 14 consecutive increases, stands at 5.25%, a level not seen since the financial crisis. This surge in interest rates, coupled with consumer prices outpacing income growth, is placing significant pressure on these families.
The survey, conducted from October 12 to 31, included 4,053 participants from the bottom 40% of income earners. It revealed a sharp rise in mortgage arrears among this group, with 58% struggling with overdue bills, up from 49% just a year ago. Moreover, many of these households are grappling with four or more unpaid bills.
The escalating cost of living has forced a staggering 76% of low-income mortgage holders to forgo essentials such as food, energy, and warm clothing. The financial squeeze is also evident in the increased rate of loan rejections for these families, which has risen from 24% in May to 29%, pushing them towards unregulated lenders. Economists at JRF, pointed out that due to the high interest rates, borrowers are now paying an average of £300 (GBP1 = USD1.2407) more per month on their mortgages compared to last year.
While higher interest rates impact all homeowners, the Resolution Foundation warns that those in the lower-income bracket who transition to new fixed-rate deals next year will experience a more pronounced decline in living standards. The poorest 40% of households could spend an additional 8% of their post-tax income on mortgage repayments, which is double the proportion for the wealthiest 40%. This forecast underscores the disproportionate burden placed on lower-income families amid rising costs and interest rates.
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