- Around 1.5 million people will need to remortgage throughout 2024.
- One in five (18%) of those who have had to remortgage onto a higher rate since the end of 2022 have ‘poor’ or ‘very poor’ financial resilience – compared to one in eight (12%) of those who have yet to refinance.
- Households that have remortgaged have just £315 left at the end of the month – £95 less than those who are yet to remortgage.
- However, things are even tougher for renters: more than half (54%) score ‘poor’ or ‘very poor’ for overall financial resilience.
Figures from the HL Savings & Resilience Barometer, July 2024
Sarah Coles, head of personal finance, Hargreaves Lansdown:
“Remortgaging remains a horrible headache, but the pain is easing slightly, and it’s nothing compared to the agony renters are enduring.
Around 1.5 million people have to remortgage at some point in 2024, and it’s going to hurt. Most are moving from deals costing them less than 3%, to rates which were just shy of 6% throughout most of June and July (average rates on 2-year fixed rate mortgages according to Moneyfacts). As a result, over the next 12 months, they’re likely to be carrying far less affordable debts.
Those who have already remortgaged have seen a major blow to their resilience, with an average of just £315 left at the end of the month – compared to £401 overall, and £410 among mortgage holders who haven’t yet had to remortgage. It means almost one in five of them are facing tricky financial times – scoring ‘poor’ or ‘very poor’ for overall resilience.
The good news
Things are actually looking marginally brighter for remortgagers in the coming months. Those on fixed deals have been shielded from the worst of things so far. Since the start of the decade, they’ve seen the largest increases in their resilience scores, because so far they’ve benefited from wage rises, and have not yet paid the price of higher monthly mortgage payments.
Those who have yet to remortgage are also likely to be on slightly higher rates than those who have done so since 2022 – and they’re remortgaging onto rates that are down from the peak. Those who remortgage in the next six months or so are likely to be moving from a rate of 2%-2.5% to one that’s currently closing in on 5%. It means the jump in rates is going to be painful, but they don’t have quite the same gap to clear as those who came before them – who faced a rise from less than 2% to more than 6.5% in some instances.
It’s also worth highlighting that those who own with a mortgage tend to be in a reasonably strong position overall. Around three quarters have enough emergency savings (73%) and more than half (57%) have enough money left at the end of the month to be resilient. It puts them in a better position to withstand the blow.
The bad news
Unfortunately, the situation is worse for renters. Their financial resilience has increased in step with the national average since before the pandemic. However, it was lower than the resilience of those with mortgages from the start. There are more worrying signs when it comes to their debts too. The percentage of renters with arrears has risen 3.5% and the percentage who are worried by their debts has risen 10 points over this period. They also fare badly when it comes to preparations for retirement.
There are certain groups of renters in particular trouble. Almost all renters with children among the lowest fifth of earners (99.6%) have poor or very poor resilience. And the average household in this group has emergency savings to cover just two weeks’ worth of essential expenses – when advisers recommend a minimum of 3-6 months’ worth.
Those who are renting over the age of 50 are also struggling, with almost two thirds (64%) scoring poor or very poor. This reflects the fact that people in this group either tend to be on lower incomes, or have had to wrestle with setbacks through their adult life that have left them on the back foot financially. They also face the prospect of retiring in rental property – which gives than a huge challenge in retirement.
What can renters do?
While life may get easier for those with mortgages as rates ease, the same can’t be said for renters. They’re still facing rising rents, as tenant numbers keep increasing and landlords continue to sell up. It means people need to manage their finances carefully in order to stay on an even keel.
Drawing up a budget will be essential, so you can see everything coming in and everything you’re spending. As your rent rises, you’re faced with the horrible challenge of either freeing up money elsewhere by cutting back, or making compromises over where you’re prepared to live. By this stage, after rents have risen so far, there’s a risk there are no more costs to cut, so you need to consider real lifestyle changes – either moving somewhere smaller and cheaper, or cutting back on those things you have always considered to be the bare minimum. It’s hard enough to manage your day-to-day costs, but you can’t afford to overlook saving for the future too.
When you’re continually cutting back and compromising, it can feel like you’re moving in ever-decreasing circles, so you need some hope. For some people this will be the idea that one day they will be able to afford to buy a property of their own. This can feel like a distant dream, but it’s worth taking the steps you can in the right direction. If you’re aged 18-39, and have at least a year until you plan to buy, one key step you can take is to open a Lifetime ISA and set up a regular payment. The government will top up everything you pay in by 25%, which is free money towards your deposit. Don’t worry if you can’t pay in the maximum of £4,000 a year, anything you can afford to put away is a boosted step in the right direction, and offers some hope in what can be a fairly miserable situation.”
