Mortgage payments near half of consumer’s income 

Over 367,000 of these fixed-rate mortgages are due to come to the end of their five-year deals over the next year; the majority of which have an average outstanding balance of £170,000. This will mean an average increase in monthly repayments of around £300 if customers revert to a variable rate.  

In the past 18 months, many homeowners have avoided a significant increase in their monthly repayments due to fixed-rate deals, even as the Bank of England has undertaken record base rate increases, rising from 0.25% to 4.5%. 

However, with fixed-rate mortgage offers currently hovering at around five percent, consumers will be faced with substantial increases in monthly expenditures amid already constrained pay growth and persistently high inflation. 

For those entering the housing market, average monthly repayments have increased by 40%. The average mortgage applicant at the end of 2021 would pay around £1,000 a month, whereas now they could pay up to £1,400. 

Considering that the average monthly income in the UK is £2,560, mortgage payments will likely take up over 50% of people’s monthly income, whilst households try to manage skyrocketing bills and turbulent interest rates. 

Paul Heywood, chief data & analytics officer at Equifax UK, said: “There is a risk that some consumers could become mortgage prisoners with the current state of rates. Amongst these consumers, we expect to see a gradual increase in missed payments. Diminishing affordability levels may also restrict or even stall growth in house prices, perhaps leading to a correction in the housing market.  

“The starting point for lenders and credit providers is to understand which of their customers are most likely to be impacted by rising mortgage rates, what the extent of that rise is likely to be, and the likely timing of that impact.  

“Through Open Banking analysis, we can support lenders to anticipate such changes and act accordingly in the face of the looming mortgage shock, by analysing customer affordability, amongst other factors. We can also help limit lending to overindebted consumers and provide support on how to roll this out.”