The Financial Conduct Authority (FCA) has warned that more than 750,000 people are at risk of defaulting on their mortgage in the next two years.
In a letter sent to the Treasury Select Committee on December 14, the regulator said that at the end of June 2022, there were nearly 200,000 regulated mortgages in payment shortfall, around 2.4 per cent of regulated residential mortgages.
In addition, the FCA estimated that up to an additional 570,000 mortgage borrowers could be at risk of payment shortfall in the next two years.
Shortfall was defined as having to pay 30 per cent of their gross household income towards mortgage payments.
The number of mortgagors at risk of default is sensitive to changes in interest rates, the FCA said, as well as external forecasts of changes in real incomes between 2020 and 2022. It assumed that “all households would experience a ten per cent fall in their real incomes over this period”.
The figures come just two days after the ONS said that 1.4m households in the UK face the prospect of interest rate rises when they renew their fixed rate mortgages in 2023.
The Bank of England’s Financial Stability Report suggests that mortgagors on fixed rates set to expire by the end of 2023 are facing monthly repayment increases of around £250 upon refinancing to a new fixed rate.
The Treasury Committee published the figures today alongside the FCA’s responses to a range of issues raised by the Committee in a recent hearing, including the suspension of Woodford Equity Income Fund and potentially unsafe cladding on housing.
The FCA set out its aim to become a more “innovative, assertive and adaptive regulator” with an ambition for “setting and testing higher standards”.