45% of mortgagors ‘would make big spending cuts if payments rise in next year’

Nearly half (45%) of people with a mortgage say they will have to make large cuts to household spending if their payments increase in the next year.

And more than a third (37%) would have to make small spending cuts to sustain their current lifestyle if their mortgage payments increased between now and October 2023, according to research from YouGov.

People on fixed-rate mortgages with less than a year to run are particularly vulnerable to having to make big cutbacks if their home loan payments increase, the findings indicate.

More than half (52%) in this situation would have to make significant cuts to household spending if their payments were to rise.

Among mortgage holders generally, nearly two-thirds (63%) would consider switching their mortgage deal to combat rising costs and 3% were planning to do so anyway.

One in six (16%) meanwhile would consider selling their property and 2% were planning to do this anyway.

People on a fixed-rate deal which is set to run out in months are particularly likely to consider switching mortgages or selling up.

Nearly three-quarters (73%) would consider switching and 5% were planning to do so anyway, while 23% would consider selling up and a further 2% were already planning to sell.

Among mortgage holders generally who are considering a switch, 73% would look into a fixed-rate mortgage and 4% would opt for a variable rate deal, with just over a fifth saying they do not know what type of mortgage they would move to.

More than 1,100 mortgage holders were surveyed, among whom the majority were on a fixed-rate mortgage.

Separate figures released by Moneyfacts.co.uk on Tuesday show the average two and five-year fixed mortgage rates on offer crept up slightly compared with Monday. The average two-year fixed rate is 6.53% and the average five-year fixed rate is now 6.36%.

Bank of England base rate rises have been pushing borrowing costs up, but mortgage rates jumped significantly amid market volatility in the days following the mini-budget. The mini-budget plans were chopped back on Monday by new Chancellor Jeremy Hunt.

Further increases in the Bank of England base rate are expected amid high inflation.

Moneyfacts’ figures also show that the choice of mortgage deals fell back on Tuesday, with 3,013 products available, down from 3,104 on Monday.