Homeowners urged to check mortgage rate as 32,000 properties at risk of repossession

Tens of thousands of homeowners are at risk of their property being repossessed, sparking an alert for borrowers to check their mortgage rate and seek help from lenders.

There were 96,590 homeowner mortgages in arrears of 2.5 per cent or more of the outstanding balance in the first quarter of 2024, including 32,470 in the most severe arrears bracket, figures from UK Finance show.

The number of mortgages in the most severe category, which represents more than 10 per cent of the balance, is six per cent higher than in the previous quarter.

Mortgage repayments have skyrocketed in recent years, with the average mortgage payment now costing £457 more per month than in April 2022, according to Mojo Mortgages.

The average mortgage rate when remortgaging in April 2022 was 1.78 per cent, surging to 5.33 per cent in April 2024, analysis by the online mortgage advisors' internal data shows.

Based on these rates, the average monthly payment in April two years ago was £1,238 for a 20-year £250,000 mortgage, while it would now cost £1,695.

It equates to an extra £5,484 per year, or £10,968 more over a two-year fixed-rate term.

A mortgage expert is urging borrowers struggling with payments to check to see if they're on the standard variable rate (SVR).

"If your mortgage payments have risen significantly recently, it’s important to act fast," Claire Flynn, a spokesperson for Mojo Mortgages, said.

"The first thing to do is check whether you’ve been moved to your lender’s standard variable rate. If your previous deal has ended and you didn’t remortgage or transfer to a new product with your existing lender, this is likely the cause."

The standard variable rate is often higher than other mortgages in the market.

Flynn added: "If you’re on an SVR, you stand to save some cash by remortgaging to another deal.

"Consider speaking to a whole-of-market broker who can compare thousands of mortgage deals from different lenders, and find the best option for your personal circumstances, potentially saving you thousands."

Those whose current mortgage deal is ending within the next six months could look into remortgaging options now if they're worried about high rates.

"Most mortgage offers are valid for six months, so if your current deal is set to end within that time, you may be able to secure a new one now and switch when your existing mortgage ends, avoiding any early repayment charges," the expert said.

This could prevent them from lapsing onto the lender's SVR when the current deal ends, which is often more expensive than other deals.

Flynn explained: "If you choose a fixed-rate deal, you should also be protected from rate rises. And if rates fall before your new deal has started, you can usually switch again."

It's recommended those who have remortgage recently but are still struggling with mortgage payments speak to their lender.

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Many lenders have signed up to the mortgage charter, which outlines several support measures to help borrowers hit with increasing costs.

This can include offering the option to switch to an interest-only mortgage for six months or temporarily extending the mortgage term to reduce monthly payments.

However, while this could help in the short term, it's worth noting there are some longer-term impacts, such as more interest being paid overall.

"Make sure you discuss all the options available with your lender to find the right solution," Flynn said.

"It’s also worth noting that discussing your situation won’t impact your credit score."