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Published 12 January 2024
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9 minutes

Britain’s mortgage crisis: Optimism in short supply for 2024 despite falling rates

With monthly mortgage bills set to rise for around 1.5m homeowners looking to remortgage in 2024 and many others still scouring the market having put off buying last year, a new survey by NerdWallet UK reveals the nation’s mortgage aspirations for the year ahead.

Mortgage arrears in the UK are at their highest in six years, according to data from the Bank of England. The total outstanding mortgage balances with arrears in the UK was £18.8bn in the three months to September 2023.

With monthly mortgage bills set to rise as around 1.5m homeowners look to remortgage in 2024 and many others still scouring the market having put off buying last year, a new survey by NerdWallet UK reveals the nation’s mortgage aspirations for the year ahead.

Key findings: 

  • Over a third of UK adults (36%) are considering a new mortgage product in 2024
  • 49% of UK adults who are considering a new mortgage product in 2024 are considering a fixed-rate mortgage, whilst 20% are considering a standard variable rate (SVR) mortgage
  • Four in five UK adults with a mortgage (80%) have taken at least one specific action in the past 12 months due to the ongoing mortgage crisis
  • Nearly nine in ten (89%) UK adults who are considering a new mortgage product or who currently have a mortgage have concerns about the ability to afford a mortgage in the next 12 months

Read on to find out more about the factors affecting the UK’s home-buying aspirations and what steps borrowers can take to maximise mortgage affordability in 2024 and beyond.

A third of UK adults are considering a new mortgage product this year

2023 was a tough year for mortgage holders and aspiring homeowners, with high interest rates making borrowing more expensive. But a new study by NerdWallet UK reveals that a third of Brits (36%) are considering taking out a new mortgage product in 2024 – with over one in four (26%) planning to buy a new property and 10% planning to remortgage. 

Of those considering a new mortgage product this year, almost half (49%) are considering a fixed-rate mortgage, whilst one in five (20%) are considering a standard variable rate mortgage. Gen Z’s appear most likely to bet on falling rates with one in four (25%)of those considering a new mortgage product planning to take out a tracker mortgage.

Amy Knight, personal finance spokesperson at NerdWallet UK comments “Last year we saw almost two-thirds (65%) of Brits put off their home buying dreams due to the cost of living crisis and rising mortgage rates. Now, with some forecasters predicting that the Bank of England could begin lowering the base rate in May or June this year, we may see new signs of home-buying determination among Brits, with one in four of us planning on buying a property with a mortgage this year. But be cautious, there is always a chance the cut may not happen or it may be too small to make a significant difference.” 

Nearly nine in ten UK adults who have, or aspire to have, a mortgage, have affordability concerns this year

Mortgage ConcernsTotalGen Z(ages 18-26)* Millennials (ages 27-42) Gen Xers (ages 43-58) Baby Boomers (ages 59-77)** 
Concerns about the ability to afford a mortgage in the next 12 months (Net)89%95%94%85%70%
Concerns about interest rates going up56%42%61%57%56%
Concerns about mortgage payments increasing51%46%58%51%35%
Concerns about having to go into debt or more debt to cover necessities22%34%23%18%14%
Concerns about losing my job21%15%23%25%10%

*smaller base of 82 respondents

**smaller base of 59 respondents

According to our survey, 89% of Brits with a mortgage or those considering a new mortgage product are expecting to experience affordability hardship over the next 12 months, with Gen Z feeling the most worried (95%). Top concerns include interest rates going up (56%), mortgage payments increasing (51%) and having to go into debt or more debt to cover necessities (22%). 

Recent measures taken by the Bank of England to freeze interest rates will be welcome news for many groups, particularly Millennials, of whom more than six in ten (61%) are worried about rising interest rates.

Our survey also revealed the scale at which the current mortgage crisis is affecting homeowners and those aspiring to own a property. More than half (51%) of respondents shared concerns over their mortgage payments increasing. Millennials are the group most likely to worry about rising repayments, with nearly six in ten (58%) of those surveyed reporting nervousness over this key issue.

Our analysis also revealed that nearly half (48%) of UK mortgage holders and prospective mortgage customers worry about affordability weekly. In addition, for UK mortgage holders and those aspiring to take on a mortgage this year, more than one in five (22%) feel they may have to remain in their current property even though they want to move or buy a home. 

Four in five UK adults with a mortgage took action in 2023 to tackle their mortgage concerns

ActionTotalGen Z(ages 18-26) with a mortgage*Millennials (ages 27-42) with a mortgageGen Xers (ages 43-58) with a mortgageBaby Boomers (ages 59-77) with a mortgage**
Taken specific action as a result of the ongoing mortgage crisis (Net)80%97%86%78%47%
Spending less on non-necessities (e.g., eating out less, shopping less)42%38%45%43%33%
Spending less on necessities (e.g., going without, buying store-own brands, thrift shopping)36%33%35%40%33%
Working additional hours at my current job24%24%30%23%11%
Researched mortgage advice online21%15%25%21%11%

*smaller base size of 50 respondents

** smaller base size of 43 respondents

It comes as no surprise that mortgage holders have had to take action to mitigate affordability concerns. According to our study, four in five UK adults (80%) with a mortgage took action to adjust their finances as a result of the ongoing mortgage crisis, with Gen Z’s (ages 18 to 26) making the most financial changes (97%). Overall, 42% of mortgage holders have had to spend less on non-necessities, 36% have had to spend less on necessities, 24% have said they’ve had to work extra hours at their current jobs, and 21% have had to dig deeper into mortgage advice online. 

Almost nine in ten (86%) Millennials (ages 27 to 42) with a mortgage confirmed that they had taken specific actions as a result of the mortgage crisis. However, Baby Boomers (ages 59 to 77) took significantly fewer measures, with less than half of this group (47%) needing to take any action.

In regards to cutting down on necessities themselves, Gen Xers (ages 43 to 58) have had to adapt their lifestyle choices the most. Two in five (40%) said they’re spending less on essentials, such as switching to store-own brands or shopping secondhand.

5 steps to fulfil your home-buying dreams in 2024

If the cost of living, interest rates or a change in your personal circumstances has slowed your progress towards buying a home in 2023, taking these steps may help you put your best foot forward in getting on the housing ladder in 2024.

  1. Turn your notifications on – as well as keeping an eye on what’s happening in the wider UK housing market and your specific region, go one step further and keep up to date with local housing news. Start following local estate agents on social media and subscribe to their newsletters, these could give you valuable insights into the local market. 
  1. Experiment with affordabilityonline mortgage calculators can help you estimate what your monthly payments could be, giving you a chance to consider the impact it will have on your household budget. Look at the rates offered by the best mortgage lenders and try saving that amount for a few months. If you’re currently renting and your mortgage payments will be higher than your rent, try saving the difference for a few months. This allows you to prove to yourself, never mind a lender, that you’ll be able to cover the mortgage repayments. The bonus is that money you’ve saved could help towards your deposit or the cost of moving.
  1. Tighten up your spending – if your affordability experiments reveal that meeting mortgage repayments would be a struggle given your current outgoings, take a close look at where your money is going each month. You can do this manually by reviewing your transactions every month and recording them in a spreadsheet, or you can switch your current account to one where transactions are categorised automatically. Whether you prefer to review spending habits on paper or in an app, the important thing is to get visibility of where your spending does not align with your financial goals. It could be clothes shopping, restaurant visits or taxi fares; once you’ve identified the area or areas where you can reduce your spending, that money can be reallocated towards your homebuying goals.  
  1. Be flexible on space – if you need three bedrooms but want a four-bedroom home, include three-bedroom properties in your search anyway. By discounting the three-beds you could miss out on some deals, including properties where there’s scope to convert the garage, loft or another room into a guest suite in the future. The same goes for properties with smaller reception rooms but a generous garden. Extending is often more cost-effective than moving, and even if you don’t expect to live in a property long enough to justify extending it, the fact that a home offers the potential to extend will make it more attractive when you come to sell it on. 
  1. Share your financial goals with friends and family – If you’re on a savings mission, it doesn’t have to be a secret. Make 2024 the year you talk openly and honestly about money with your nearest and dearest. Talk to friends and family about your financial goals and how this may affect other areas of your life. For instance, committing to saving up for a deposit to buy a property may mean cutting back on meals out and trips to the pub. When your friends and family understand your goals, they are likely to be more supportive of your decision to spend less on socialising. 

Methodology

This survey was conducted online within the United Kingdom by The Harris Poll on behalf of NerdWallet UK from December 7 – 11, 2023 among 1,025 U.K. adults ages 18 and older. The sampling precision of Harris online polls is measured by using a Bayesian credible interval. For this study, the sample data is accurate to within +/- 3.3 percentage points using a 95% confidence level. For complete survey methodology, including weighting variables and subgroup sample sizes, please contact: [email protected].

Image source: Getty Images

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