The survey, conducted from October 12 to 31, included 4,053 participants from the bottom 40 per cent of income earners
A recent survey by Savanta has underscored the growing financial strain on low-income UK households, with more than half now falling behind on their mortgage payments. The BoE’s target rate, which has undergone 14 successive increases, stands at 5.25 per cent, a level not seen since the financial crisis. This jump in interest rates, along with consumer prices outpacing income growth, is placing considerable pressure on these families.
The survey, conducted from October 12 to 31, included 4,053 participants from the bottom 40 per cent of income earners. It found a sharp increase in mortgage arrears among this group, with 58 per cent struggling with overdue bills, up from 49 per cent just a year ago. Furthermore, many of these households are struggling with four or more unpaid bills.
The rising cost of living has compelled a staggering 76 per cent of low-income mortgage holders to give up essentials like food, energy, and warm clothing. The financial pressure is also apparent in the increased rate of loan rejections for these families, which has increased from 24 per cent in May to 29 per cent, pushing them towards unregulated lenders. Economists at JRF, pointed out that due to the high interest rates, borrowers are now paying an average of £300 more per month on their mortgages compared to last year.
While higher interest rates affect all homeowners, the Resolution Foundation cautions that those in the lower-income bracket who transition to new fixed-rate deals next year will experience a more pronounced decline in living standards. The poorest 40 per cent of households could spend an additional 8 per cent of their post-tax income on mortgage repayments, which is double the proportion for the wealthiest 40 per cent. This forecast underscores the disproportionate burden placed on lower-income families amid rising costs and interest rates.