How have mortgage holders and renters been coping with the rise in housing costs?

Key findings

• As housing costs have risen sharply in the past year, nearly half (46%) of households with mortgages or who are renting have been struggling to keep up with their housing payments. This equates to about seven million households.
• Nearly a third (31%) of mortgage holders have dipped into savings to pay for bills, the highest rate amongst all housing tenures. Meanwhile, private (27%) and social renters (25%) have also had to make similar adjustments. 
• At least half of households with a mortgage and renters are stressed, anxious and worried on a day-to-day basis. They are experiencing these negative emotions at around twice the rate of households who own their home outright. 
• Mortgage holders and renters are concerned about the impact of the current financial strain on their future. Nearly two-thirds of households are worried they won’t save enough for retirement and over half are already feeling less in control of their money.

Introduction

In the past two years the Bank of England has increased interest rates from 0.1% to 5.25%. Around half of mortgage holders, about 4.5 million households, have already experienced increases to their monthly payments since the first rise in December 2021 and these increases have been hundreds of pounds a month for many households.

Mortgage payments will increase for many households

Despite the Bank of England recently deciding to maintain interest rates at 5.25%, pain is still yet to come for the half a million homeowners whose fixed-rate deals are ending around year end and the 1.6 million homeowners with deals ending in 2024.

Renters have also been affected as landlords whose mortgage repayments have gone up could raise rents to offset the rise in buy-to-let mortgage costs. Figures from ONS in July 2023 showed private rental prices in the UK rose at an annual rate of 5.3%, the highest recorded change since January 2016.

Which?’s Consumer Insight tracker shows just how concerned households are about these increases with four in five mortgage owners (79%) and four in five renters (81%) worried about housing costs, the highest level since June 2013.

To understand the impact of the cost of living crisis on households, Which? surveyed 4,000 people across the UK to find out how different groups of consumers are coping -  financially, physically, mentally and socially - with the cost of living crisis.

You can access our complete library of data to understand the challenges facing consumers from our consumer data hub.

Millions of households have struggled to keep up with housing payments

Our research estimates seven million households with a mortgage or rental payment have been struggling to keep up with these payments (46%). This raises concerns as these households could be on the verge of missing their housing payments, particularly when we know that there is pain on the horizon for households who are yet to remortgage.  

Respondents highlighted their concern about potential increases on their mortgage and rent. 

“Immensely worried about how [I] can afford to cover bills and our mortgage is due to renew later in [the] year and sounds like there will be further increase in interest rates…” - Which? Cost of Living Segmentation Survey

“I worry about the roof over my head and the fact my rent is about to increase because I cannot afford to pay the increase” - Which? Cost of Living Segmentation Survey

With the increased pressure on their budgets, households have also had to make financial adjustments. Nearly a third of mortgage holders have dipped into savings to pay for bills (31%), the highest rate amongst all housing tenures. A quarter or more of private (27%) and social renters (25%) have also had to do so. For these households, it could mean having less to cover emergency spending, cutting back on discretionary spending like cars and holidays, and being less able to take advantage of higher saving rates. 

Mortgage holders have also been more likely than others to monitor their finances and budgeting more (45% of mortgage holders) and work more hours / overtime (21%).

A survey respondent expressed just how difficult it has been to keep up.

“All bills have gone up including mortgage (about £140 a month in the last year). My wages have not gone up so I am now having to work overtime to just get by.”  - Which? Cost of Living Segmentation Survey

There is a negative impact on households’ mental wellbeing 

The worsening economic environment has left many people concerned about whether they can afford to pay their housing bills, with mortgage-holders fearing repossession of their homes and renters scared of eviction.

“I'm worried I could lose my home by not being able to afford a roof over my head.” - Which? Cost of Living Segmentation Survey

Whilst UK banks have agreed with the government to wait 12 months before repossessing the homes of mortgagors who have missed payments, there are no similar mechanisms in place to protect renters. 

“...we have had to use all our savings just to get by and can no longer afford to rent.” - Which? Cost of Living Segmentation Survey

As such, homeowners with a mortgage and renters are experiencing significant emotional distress. At least half of these households are stressed, worried and anxious on a day-to-day basis, with nearly six out of 10 renters feeling worried. They are experiencing this at around twice the rate of households who own their home outright. 

Households with mortgage or rent payments have felt more emotional distress than households who own their homes outright

There is a high level of concern among both mortgage holders and renters about the precariousness of their financial situation now and in the future as well. Nearly two-thirds of these households are worried about their household’s financial security and the long-term implications on their retirement savings, whilst over half feel less in control of their money than they did previously.

Mortgage holders and renters are very concerned about their financial future

Conclusion

Households with mortgages and renters across the UK have been struggling to cope with soaring housing costs. It is clear from our research that many households are on the verge of falling behind on their housing payments, leaving them feeling stressed and uncertain about their future.

Despite the Bank of England keeping interest rates unchanged, mortgage holders and renters will likely still be facing eye-watering increases on their housing payments. Interest rates are also predicted to fall only slowly, suggesting many households will continue to struggle and be at risk of serious hardship over the next couple of years. Both government and business need to take further steps to support these households and think carefully about how to do it in the long-term.

Methodology

Basis on behalf of Which? surveyed 4,000 nationally representative consumers within the UK in March 2023 to understand the impacts of the cost of living crisis, and how it has influenced consumer behaviour.