An extra 356,000 mortgage borrowers could face payment difficulties by the end of June 2024, in addition to those who are already behind, according to the City regulator.
This has been reduced from a previous estimate made last September that an additional 570,000 mortgage borrowers could become financially stretched by the end of June 2024, the Financial Conduct Authority (FCA) said.
The FCA defined mortgage borrowers as being financially stretched if more than 30% of their gross household income was going towards mortgage payments and they were not currently in a payment shortfall.
The estimate has been revised downwards due to changes in market expectations of the Bank of England base rate.
The previous analysis was based on market expectations in September 2022, which saw the bank rate peaking at around 5.5%, as opposed to a peak of around 4.5% in the February expectations, used to calculate the most recent estimate.
Among this group, those rolling off a fixed-rate deal could end up paying an additional £340 a month on average, according to the regulator.
Around 200,000 mortgage borrowers were in payment shortfall as of June 2022.
The FCA released the latest estimate as it confirmed finalised guidance, setting out the ways that mortgage lenders can help customers worried about or already struggling with their mortgage payments because of the rising cost of living.
The regulator expects firms to support people in financial difficulty.
The guidance covers options such as extending the term of their mortgage or making reduced monthly payments for a temporary period.
Making changes, even temporary ones, may result in higher monthly payments in future or paying back more overall. Mortgage borrowers should consider carefully any steps they take and customers who can keep up with their payments should continue to do so, the FCA said.
Sheldon Mills, executive director of consumers and competition at the FCA, said: “Our research shows most people are keeping up with mortgage repayments, but some may face difficulties.
“If you’re struggling to pay your mortgage, or are worried you might, you don’t need to manage alone.
“Your lender has a range of tools available to help. Get in touch as soon as you have concerns, don’t wait until you’re about to miss a payment before doing so. Just talking to them about your options won’t affect your credit rating.”
The FCA’s research indicated that borrowers aged 18 to 34 are more likely to be financially stretched than the rest of the working age population.
Those living in London and the South East, where house prices are often higher than the UK average, are also particularly likely to be stretched.
Being stretched does not necessarily mean borrowers will miss payments as some will be able to use savings, reduce spending or increase incomes to help meet their mortgage commitments.
As well as contacting their lender for support, worried borrowers can also visit MoneyHelper for money tips, budgeting tools and to find free debt help.
The FCA, major lenders and consumer representatives attended a 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.
Lenders have proactively contacted customers a combined total of 16.5 million times, across a range of channels, to offer support in the past year, the regulator said.
They expect this to increase this to 20.5 million contacts over the next year.
Lenders supported more than two million customers to manage their finances in the past year, including through budgeting tools, access to debt advice, and tailored mortgage forbearance.
The FCA said it will continue to monitor the mortgage market and how firms are supporting their customers.
