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ONS: 42% of people struggling to pay rent or mortgage

ended 08. September 2023

The ONS has just published a survey showing that, among those who are currently paying rent or a mortgage, 42% reported finding it very or somewhat difficult affording these payments; this was 35% during a similar period one year ago (31 August to 11 September 2022).

The survey also revealed that, among those currently paying rent or a mortgage, more than 4 in 10 (45%) reported that their rent or mortgage payments had gone up in the past six months.

Meanwhile, around half (51%) of adults reported that their cost of living had increased compared with a month ago, 46% reported it had stayed the same and 3% said it had decreased.

When asked about what people are doing because of the increases in the cost of living, around two-thirds (67%) said they were spending less on non-essentials, half (50%) of all adults were shopping around more, and more than 4 in 10 (45%) were spending less on food shopping and essentials.

According to Craig Fish, managing director at London-based mortgage broker Lodestone: “The results of this survey are not unexpected but are a very worrying sign of things to come. Considering the relentless increases in the base rate and the cost of living crisis, you might have expected a larger increase year on year. However, many people are still benefiting from low fixed rates on their mortgage. When they come to review and experience significantly increased mortgage payments, it’s likely that these numbers are going to get much worse. The Monetary Policy Committee needs to pause now and let things settle, otherwise the financial fallout could be brutal.”

His views were shared by Justin Moy, founder at Chelmsford-based mortgage broker, EHF Mortgages: "Whilst these figures are worrying, we haven’t seen the worst of the mortgage crisis just yet, with another 400k deals ending by the end of the year and a further 1m renewal deals in 2024. Targeting borrowers to correct a UK-wide issue of high inflation will end up with a complete disaster of an economy and ultimately more Government bailouts. We are on the precipice of a recession and the Government needs to act now."

Richard Campo, founder of London-based Rose Capital Partners, said simply: “It's no surprise to learn that 42% of people are struggling to pay their rent or mortgage. With the Bank of England increasing rates by 300% in the past 12 months alone (from 1.75% to 5.25%), mortgage rates have followed suit, as have rents. That is a huge shock to the system. That alone would be manageable but this is also at a time of hyperinflation of well over 10% of the majority of that time. I think this also shines a light on the huge level of unsecured debt in the UK, which sits at a staggering £11,000 per household. While this is a very painful transition out of an ultra-low interest rate environment that we have all become accustomed to over the past 13 years, the positive to take away will be there will be a greater focus on paying off debt which will be good for individuals and the economy in the long run. That will require some behavioural change of not 'Ubering' meals and 'Amazoning' whatever you want to buy. So while painful medicine, I feel that the patient needs it.”

Jamie Lennox, director at Norwich-based mortgage broker, Dimora Mortgages, said the worst of the crisis is yet to unfold: “What is alarming is that this is only the tip of the iceberg and more pain is likely to be felt in the next 12 months as more mortgage holders roll off record low fixed rates.”

Ranald Mitchell, director of Norwich-based independent mortgage broker, Charwin Private Clients, was worried about people cutting back on essentials: "Many are cutting back on non-essential expenditures, which is expected in times like this, but worryingly, 45% of people are cutting back on essentials. That is a number the Government and Bank of England need to think long and hard about."

Meanwhile, Joshua Gerstler, chartered financial planner at Borehamwood-based The Orchard Practice, warned that people who are struggling should be careful where they seek to save money: “It can be tempting at times like these to look to cut spending in areas such as life insurance and income protection, but I urge people to keep these important policies. First, look to see if you can save in non-essential areas such as TV subscriptions. You can always watch Freeview TV but you cannot get a £1m life insurance payout if you don't pay your premiums.”

Darryl Dhoffer, founder of Bedford-based The Mortgage Expert, said the Bank of England needs to wake up and smell the coffee: “These are stark figures indeed and highlight the real pain renters and mortgage holders are currently experiencing. The Monetary Policy Committee seems to believe that disposable income today is more than during the recession of the 1990s and the Credit Crunch of 2008, but they need to wake up and smell the coffee. These are real figures with real pain experiences that will only get worse as the year unfolds.”

Graham Taylor, managing director of Nailsworth-based independent mortgage broker, Hudson Rose, added: “These worrying figures show that the cost of living crisis is still very much in full swing. We are seeing the real effect of the base rate increases, leading to those coming off fixed-rate mortgages starting to feel the pinch. With more mortgages set to roll off their historic low rates, expect these payment worries to increase in the coming months.”

Sharing his views on soaring rents, Kundan Bhaduri, director of London-based property developer and portfolio landlord, The Kushman Group, pointed the finger firmly at the Government: “It is no wonder that this Government's anti-business, anti-landlord stance has started to show its results, in the real world."

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16 responses from the Newspage community

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Editor
Craig Fish
Director at Lodestone Mortgages
The results of this survey are not unexpected but are a very worrying sign of things to come. Considering the relentless increases in the base rate and the cost of living crisis, you might have expected a larger increase year on year. However, many people are still benefiting from low fixed rates on their mortgage. When they come to review and experience significantly increased mortgage payments, it’s likely that these numbers are going to get much worse. The Monetary Policy Committee needs to pause now and let things settle, otherwise the financial fallout could be brutal.
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Samuel Mather-Holgate
Independent Financial Adviser at Mather and Murray Financial
The last 18 month has been catastrophic for homeowners and renters. The government wound up all support for energy bills, tax thresholds didnt increase so more of their money went to the government and the Bank of England set out on a campaign to make living comfortably unaffordable. The results are in, and they achieved their goal. This data isn't surprising, given the catalogue of assaults on our bank balances, but it is shocking nonetheless. More than 4 in 10 people are finding it difficult to pay their mortgage or rent. This is a clear indication that the central bank had gone too far several months ago, but has kept up its pressure on households and the effect of the most recent rate hikes is yet to translate into these figures. Unless Andrew Bailey reverses these rate cuts we could have a homelessness crisis in the UK, like never seen before.
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Editor
Justin Moy
Managing Director at EHF Mortgages
While these figures are worrying, we haven’t seen the worst of the mortgage crisis just yet, with another 400k deals ending by the end of the year and a further 1m renewal deals in 2024. Targeting borrowers to correct a UK-wide issue of high inflation will end up with a complete disaster of an economy and ultimately more Government bailouts. We are on the precipice of a recession and the Government needs to act now. Their strategy at the moment has more holes than Raac.
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Editor
Darryl Dhoffer
Founder at The Mortgage Geezer
These are stark figures indeed and highlight the real pain renters and mortgage holders are currently experiencing. The Monetary Policy Committee seems to believe that disposable income today is more than during the recession of the 1990s and the Credit Crunch of 2008, but they need to wake up and smell the coffee. These are real figures with real pain experiences that will only get worse as the year unfolds.
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Riz Malik
Independent Financial Adviser at R3 Wealth
When you have depleted your savings and cut back all the non essentials, there is little else to do. Unfortunately, people will continue to struggle and the only certainty is that the Government will do little to support them.
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Ranald Mitchell
Director at bad credit mortgage specialists Charwin Mortgages
The ONS data is unsurprising in many respects as inflation, interest rate hikes and pressure on landlords to increase rents continue to create financial pressures. Many are cutting back on non-essential expenditures, which is expected in times like this, but worryingly, 45% of people are cutting back on essentials. That is a number the Government and Bank of England need to think long and hard about. We are in a period of recalibration right now and the new normal is bedding in. Mortgage interest rates are very unlikely to return to the ultra-low decades, landlords will not be reducing rents and the cost of essentials will remain similar to its current levels. Wage demands will increase putting pressure on employers and ultimately, we are likely to see a rise in unemployment if this scenario unfolds.
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Stephen Perkins
Managing Director at Yellow Brick Mortgages
Whilst these figures paint a horrific picture of the current state of household finances, I am surprised that year on year the percentage of people struggling to pay their mortgage or rent has only increased by 7% given the increases in mortgages, rents and all the other costs of living. The Bank of England themselves say it takes 18 months for the full impact of an interest rate rise to be seen, so with so many such rises over the last 12 months and so many mortgages yet to come off their low fixed-rate deals the worst is yet to come. Cutting back on non-essentials is papering over the cracks for now, but such measures can only go so far.
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Kundan Bhaduri
Property Developer and Portfolio Landlord at The Kushman Group
It is no wonder that this Government's anti-business, anti-landlord stance has started to show its results, in the real world. Rents are becoming increasingly unaffoardable because of the completely bizarre interest rate scenario, and the fact that lenders have to stress test mortgages at unrealistic rates (150% of interest cost at 8%, for example when yields are at 5-6% in most parts of London). The lobby groups that antagonise landlords are equally to blame. Remember, it is private funds that is propping up the PRS at the moment. If it becomes onerous, disingenuous and a lot more red tape added to the process of investing that capital, the money is simply going to move elsewhere. That's the reality and the actors involved in this are to blame for it.
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Jamie Lennox
Director at Dimora Mortgages
This data comes as no surprise to many. What is alarming is that this is only the tip of the iceberg and more pain is likely to be felt in the next 12 months as more mortgage holders roll off record low fixed rates. This, combined with the rise in unsecured credit levels, would indicate more people are leaning on credit cards just to keep afloat. Sadly, at some point, this bubble will pop and could lead to mass arrears across the board.
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Graham Cox
Director at Bridging Hub
The ONS survey illustrates the stark choices people face. And unfortunately for many, the pain is still to come, as millions face having to remortgage at 3-4 times their current mortgage rate. As renters and homeowners alike batten down the hatches, the knock-on effects for the wider economy are huge, and we're likely to have a sharp recession in 2024.
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Joshua Gerstler
Chartered Financial Planner at The Orchard Practice
Now is the time when we will see more people suffering. Although mortgage rates have been high for a while, and rents have been increasing, people have been on fixed rate deals on their mortgages or on ASTs for the rental. Now that rates and tenancies are ending, they are being renewed and are now much more expensive. This, combined with the soaring inflation over the past couple of years, is now really hitting many people hard. It can be tempting at times like these to look to cut spending in areas such as life insurance and income protection, but I urge people to keep these important policies. First, look to see if you can save in non-essential areas such as TV subscriptions. You can always watch Freeview TV but you cannot get a £1m life insurance payout if you don't pay your premiums."
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Charles Breen
Founder at C B
In recent weeks, numerous headlines have centered around the looming mortgage shock as borrowers transition away from fixed-rate mortgages. This is causing heightened anxiety, especially among low-income homeowners who are already grappling with financial challenges and possess limited financial cushioning to withstand potential future economic shocks. Many individuals with mortgage commitments have experienced a significant surge in housing-related expenses. The increase in housing costs and reduction in people's spending power is sadly what is needed to get inflation under control. Sadly, this strategy disproportionately affects those with the least amount of financial fortitude and resilience the most.
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Richard Campo
Founder at Rose Capital Partners
It's no surprise to learn that 42% of people are struggling to pay their rent or mortgage. With the Bank of England increasing rates by 300% in the last 12 months alone (from 1.75% to 5.25%), mortgage rates have followed suit, as have rents. That is a huge shock to the system. That alone would be manageable but this is also at a time of hyperinflation of well over 10% of the majority of that time. I think this also shines a light on the huge level of unsecured debt in the UK, which sits at a staggering £11,000 per household. While this is a very painful transition out of an ultra-low interest rate environment that we have all become accustomed to over the past 13 years, the positive to take away will be there will be a greater focus on paying off debt which will be good for individuals and the economy in the long run. That will require some behavioural change of not 'Ubering' meals and 'Amazoning' whatever you want to buy. So while painful medicine, I feel that the patient needs it.
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Peter Stamford
Mortgage Expert at Stamford Home Finance
The recent survey hints at a looming crisis, with many still enjoying low mortgage rates but for not much longer. As these rates expire, we risk a spike in financial hardships, with homeowners leaning more on credit to get by. The current Government strategy seems insufficient to prevent a potential economic slide. It's a wake-up call demanding a shift in approach to avoid worsening the current struggles.
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Gary Bush
Financial Adviser at MortgageShop.com
This data is sad reading however the general public needs to know that most qualified financial practices have arrangements in place to assist them through these times. On the other side of the coin, we are still seeing packed shopping outlets, long queues at supermarkets and hardly any space at coffee houses and eateries. I am not sure how deep this survey actually goes into the UK population?
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Graham Taylor
Managing Director at Hudson Rose
These worrying figures show that the cost of living crisis is still very much in full swing. We are seeing the real effect of the base rate increases, leading to those coming off fixed-rate mortgages starting to feel the pinch. With more mortgages set to roll off their historic low rates, expect these payment worries to increase in the coming months.