200,000 borrowers face ‘mortgage shock’ in 2023 – Mortgage Strategy
Around 200,000 of its mortgage borrowers face a “mortgage shock” this year when they come off their fixed-rate loans, says Lloyds Banking Group chief executive Charlie Nunn.
About 10% of its home loan customers are due to exit a fixed-rate deal in 2023 and look for a new offer at a time when interest rates have jumped, the bank boss told Ian King Live on Sky News last night.
He says: “Where we’re really focused on as a bank is looking at those customers that are going to have an increase in their mortgage payments which is going to increase their interest they pay as a percentage of their income.
“There’s less than 1% of our customers that we think are going to have a mortgage interest shock like that and what we’ve been doing is quietly reaching out to them.
“There’s about 200,000 we have been reaching out to and that’s where really focus, on those customers who are going to have that increase which could make it difficult for them to make ends meet.”
The financial group includes Lloyds Bank, Halifax, Bank of Scotland and Scottish Widows.
Interest rates have risen from 0.1% in November 2021 to currently stand at 4%, their highest level in over 14 years. Inflation at 10.1%, remains close to its highest level for 40 years.
Earlier this month, the Bank of England forecast a downturn will be shorter and less severe than it said in its November report, lasting just over a year rather than almost two, as energy bills fall and price rises slow.
The BoE says the UK economy will fall by around 1% this year rather than the 3% it forecast three months ago.
More than 1.4 million households face the prospect of interest rate rises when they renew their fixed-rate mortgages this year, the Office for National Statistics estimated in January.
The numbers body says this accounts for 57% of all fixed-rate home loans in the country, adding that mortgage loans that needed to be renewed this year were fixed at interest rates below 2%.
The average rate for a two-year fix is 5.33%, while the average rate for a five-year fix is 5.05%, according to the latest data from Moneyfacts.
Also, in January, the Financial Conduct Authority said over 750,000 UK households are at risk of defaulting on their mortgage payments over the next two years.
It estimated that 200,000 households had already fallen behind on their home loans by last June, accounting for 2.4% of all regulated residential mortgages, said FCA chief executive Nikhil Rathi in a letter to the House of Commons Treasury select committee.
The head of the financial watchdog added that a further 570,000 households are “at risk of payment shortfall” over the next two years, assuming that UK households suffer a 10% fall in income over this period due to cost-of-living pressures.