October 18th, 2022, Christien Pheby
The Bank of England recently suggested that – thanks to rising interest rates and the global cost of living crisis – the number of households struggling with mortgage payments could soon reach highs not seen since the 2008 financial crisis. It’s a grim warning, and one that piles additional pressure on the nation’s homeowners after the turmoil following the former Chancellor’s (historically unpopular) mini-budget saw hundreds of lenders withdraw their products from the market and reintroduce them at significantly higher rates.
A new YouGov RealTime survey of Britons who are currently repaying mortgages on their primary residence shows that surging interest rates could have drastic consequences.
Four in five (82%) expect they would have to tighten their belts if their payments went up – with more than two in five (45%) expecting to make large cuts to household spending. Just one in nine (12%) expect to maintain their current lifestyles.
Will Britons switch their mortgage deals if interest rates increase?
Beyond belt-tightening, rising interest rates could have more far-reaching effects. Ask Britons with mortgages if they would consider switching their deal in the event of increased payments, and six in ten (63%) say they would, with two in ten saying they would not (22%).
Look at two groups who are in more immediate danger of being affected by a rate rise, however, and the story is a little different. Among people with a year or less left to run on their fix, three-quarters (73%) say they would change mortgage deals – while people on a variable-rate agreement are more evenly split (42% would switch; 41% would not). It may be that those on fixed mortgages are more risk-averse and want the predictability of a locked-in rate; while those who are planning to stick with a variable agreement are trusting that the situation will improve in time.
In any case, Britons who plan to change their mortgage deal are overwhelmingly opting for a fixed-rate over a variable-rate deal at this moment in time (73% vs. 4%). We can also see that, of those who are going for a new fix, half (50%) want an agreement that lasts five years or more, with 14% saying they want an agreement of ten years or more. Just two in five want an agreement that lasts for less than a half-decade (42%).
Among those who would consider switching, half would use a mortgage broker (50%), with two in five choosing to take out a mortgage directly from a bank or other lender (39%).
16% of homeowners with mortgages would consider selling their house in the event of a rate rise
For households with narrowing financial wiggle room, making cutbacks or switching mortgage agreements can make sense. But at a time when commentators are arguing that, month to month, paying off a house can be more costly than renting, are homeowners considering giving up their houses?
Our data shows that, overall, 16% say they would consider selling their properties in the event that interest rates increased further over the next year. This figure rises to 20% among those who are currently on a variable deal, and 23% among those on a fixed-rate mortgage with a year or less to run.
Methodology
YouGov RealTime Omnibus provides quick survey results from nationally representative or targeted audiences in multiple markets. This study was conducted online on 5-10 October 2022, with a nationally representative sample of 1,162 adults in GB with mortgages, using a questionnaire designed by YouGov. Data figures have been weighted to be nationally representative of all adults in Britain by age, gender, social class, region and level of education, and reflect the latest ONS population estimates. Learn more about YouGov RealTime Omnibus.
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