Millions of homeowners could be at risk of defaulting on their mortgage if interest rates move upwards again, according to new research from Moneyhub Decisioning, an Open Finance-based data platform.
Moneyhub’s research found that 26% of homeowners with a mortgage said that a further interest rate rise would mean they won’t be able to afford their mortgage payments.
Meanwhile, 35% of homeowners with a mortgage said they were concerned that they will not be able to afford their mortgage when they re-mortgage due to rising rates.
Suzanne Homewood, managing director, decisioning at Moneyhub, said: “Times are challenging for homeowners. Mortgage rates continue to rise to levels not seen since before the financial crisis and other essential costs are eroding financial buffers, leading to a complex situation and increased risk for both consumers and lenders.
“It’s clear that there needs to be more support for those remortgaging or on tracker or variable rates who will be feeling the impact of rising monthly payments. With Moneyhub’s Open Finance powered Decisioning tools, lenders will be able to better understand their customers’ financial circumstances and offer products that are based on their current and historic spending patterns and behaviours, and therefore what they can actually afford.
“In addition, whilst providers stress-test a customer’s finances at the point of sale, they are not aware if/when a customer’s circumstances change and therefore if the product is still suitable. With the FCA’s new Consumer Duty regulations coming in next month, it’s vital that banks and lenders can prove products that are suitable for their customer across the life cycle of the product.
“Holistic, timely and relevant communication to those that could be falling into financial stress via Open Finance will support better outcomes, which has to be good for everyone.”