1.2m UK households to become insolvent this year – NIESR


The National Institute of Economic and Social Research, a well-regarded think tank, estimates that 1.2m UK households – 4% of all households – will run out of savings because of higher mortgage repayments and become insolvent by the end of the year.

This will take the total proportion of insolvent households to nearly 30%, or around 7.8 million.

With the Bank Rate rising at their fastest pace since the Bank of England gained independence in 1997, millions of households will be affected by higher mortgage repayments.

A significant proportion of the population will see their savings wiped out because of the rise in interest rates and higher mortgage repayments. The largest impact will be felt in Wales and the North-East where up to 6% of households are projected to be insolvent by the end of the year as a direct result of higher mortgage repayments.

Also, the analysis finds that the rising repayments will wipe out 0.3% of UK GDP, costing all households with mortgages a total of £12bn per year.

Other key points include:

  • Monthly mortgage repayments will rise by nearly 50% on average: this rise is above typical stress-tests households are subjected to when applying for a mortgage.
  • Fixed-rate monthly mortgage repayments will rise from around £700 to £1,000 on average: this applies to nearly 2m households when needing to remortgage.
  • Variable-rate monthly mortgage repayments will rise from around £450 to £700: this applies to 1.5m households on variable-rate mortgages.

The institute called on the government to consider intervening in forbearance agreements, which allow households to agree to create repayment plans based on what they can afford when they are unable to repay their debt.