Mortgageholders cut pension contributions to reduce debt

Mortgageholders cut pension contributions to reduce debt

A new survey shows that mortgageholders are making substantial changes in their finances - from cutting pension contributions to downsizing - to cope with significantly higher monthly payments.

Faced with either the immediate reality of higher mortgage costs or the prospect of a sharp rise in payments once an existing deal has expired, more than 1,000 mortgage holders were asked by KPMG this month whether they have either already taken, or were considering taking action to deal with this, the company said in a statement.

About 18% said they raided their savings to reduce their debt, while 25 percent said they were considering doing this.

When it came to moving at least part of the mortgage over to interest-only, so the household clears just the interest that accrues on that part, thereby cutting monthly repayments, 16% said they had already done this, and 24% said they were thinking about doing so.

Some people can extend the length of their mortgage term, which reduces the monthly payments, and of those polled by KPMG, 12% said they had done this, while 25 percent were considering such a move.

Some have turned to the more extreme measure of selling up and moving to a cheaper home, with 8% saying they had already done so, while more than one in five were thinking about it.

But 11% said they had cut their pension contributions, with 20 percent considering doing so.

The findings were part of KPMG's latest Consumer Pulse research, which tracks how more than 3,000 people across ages, income groups and UK regions are responding to the cost of living crisis.

But there was a glimmer of good news for homeowners and prospective buyers, with separate data from Moneyfacts showing that more fixed-rate mortgages priced below 5% went on sale this week, with the Bank of England looking poised to pause the series of interest rate rises imposed to curb inflation.

On Wednesday, HSBC launched some deals with five-year fixed rates starting at 4.9%, while NatWest will offer deals from 4.89% on Thursday.

The average new five-year fixed-rate residential mortgage is edging closer to falling back below the 6% mark.

Moneyfacts said the average new deal was priced at 6.03% on Wednesday, down from 6.04% on Tuesday.