Mortgage debt squeeze tightens

The number of UK homeowners with more than £300,000 left to repay on their mortgage has nearly doubled in the past seven years, highlighting the growing financial strain many are facing, amid high property prices and rising interest rates.

New analysis of the Financial Conduct Authority’s (FCA) Financial Lives Survey reveals that 9% of mortgage holders now owe over £300,000 – up from just 5% in 2017. In areas with the highest house prices, such as London and the South East, the proportion jumps significantly. Today, 28% of homeowners in these regions owe over £300,000, compared with 17% seven years ago.

The analysis reveals a growing trend of homeowners taking on substantial mortgage debt, while household incomes have failed to keep up with rising property prices. In addition, the recent surge in mortgage costs has intensified financial pressure - especially in regions where borrowing was already high.

Stretching affordability

Most lenders cap borrowing at around four-and-a-half times a borrower’s annual income. But the data shows that one in seven homeowners now hold mortgage debt worth at least four times their income – a notable increase from 11% in 2017. Although this is down slightly from the 2020 and 2022 peak of 16%, it suggests many homeowners have little headroom left.

The figures present a concerning picture, especially considering how many borrowers still neglect to shop around for more competitive mortgage deals. Even modest reductions in interest rates can lead to significant long-term savings over the course of a mortgage.

Wider signs of financial strain

The FCA survey paints a broader picture of financial vulnerability across the UK. One in 10 people reported having no savings at all. Almost a quarter of respondents were classed as having low financial resilience.

Sarah Pritchard, Executive Director of Consumers and Competition at the FCA, acknowledged the pressures many households are facing. “FCA data shows that finances are stretched for many,” she said. “But there are improvements – more people with current accounts and less digital exclusion. Our strategy will build on this to help people better navigate their financial lives.”

Looking ahead

With mortgage debt levels rising and many homeowners close to their borrowing limits, it’s vital to review your finances regularly and seek professional advice to avoid long-term financial strain.

Your home may be repossessed if you do not keep up repayments on your mortgage.

Sources: https://www.yourmoney.com/mortgages/proportion-of-homeowners-with-over-300000-left-to-pay-off-on-mortgage-nearly-doubles/

https://www.fca.org.uk/publication/financial-lives/financial-lives-survey-2024-key-findings.pdf