An additional 356,000 mortgage borrowers, in addition to those in arrears, could face payment difficulties by the end of June 2024, according to the City regulator.
This is down from an earlier estimate made last September that an extra 570,000 mortgage borrowers could be financially vulnerable by the end of June 2024, the Financial Conduct Authority (FCA) said.
The FCA has defined mortgage borrowers as financially distressed if more than 30% of their gross household income is spent on mortgage payments and they are not currently in a payment shortfall.
The estimate has been revised downwards due to changes in market expectations for the Bank of England’s base rate.
The previous analysis was based on market expectations for September 2022, which saw the Bank Rate peak at around 5.5%, versus a peak of around 4.5% in the February expectations used to calculate the most recent estimate.
Among this group, those opting out of the fixed-rate deal could pay an extra £340 a month on average, according to the regulator.
As of June 2022, approximately 200,000 mortgage borrowers are in default.
The FCA has issued the latest assessment as it confirms final guidance for mortgage lenders outlining ways they can help customers who are worried about or struggling with their mortgage payments due to the rising cost of living.
The regulator expects firms to support people in financial difficulty.
The guidelines include options such as extending their mortgage or reducing monthly payments for a temporary period.
Making changes, even if temporary, may result in higher monthly payments or an increase in your total payment in the future. Mortgage borrowers should carefully consider any moves they make and customers who can keep up with their payments should continue to do so, the FCA said.
Sheldon Mills, the FCA’s executive director of consumer and competition, said: “Our research shows that most people are paying off their mortgages, but some may be struggling.
“If you’re struggling to pay your mortgage or worried about paying it off, you don’t have to go it alone.
“Your lender has many tools to help. When you are concerned, contact us immediately, don’t wait until you want to miss a payment before paying. Talking to them about your options won’t affect your credit rating.”
FCA research has shown that borrowers aged 18 to 34 are in more financial trouble than the rest of the working age population.
Those living in London and the South East, where house prices are higher than the UK average, could also be particularly stretched.
Stretching doesn’t mean borrowers don’t have to miss payments, as some can use their savings, reduce expenses or increase income to help meet their mortgage obligations.
In addition to contacting a lender for support, worried borrowers can visit MoneyHelper for money advice, budgeting tools and free debt help.
The FCA, major lenders and consumer representatives attended the Mortgage Summit in December.
Since then, the FCA said it has continued to work with lenders to help borrowers get the support they need, including timely communication.
Last year, lenders actively contacted consumers a total of 16.5 million times across various channels to provide support, the regulator said.
They expect to increase this figure to 20.5 million contacts next year.
Lenders helped more than two million customers manage their finances last year, including budgeting tools, access to debt counseling and mortgage adjustment.
The FCA said it would continue to monitor the mortgage market and how firms support their customers.